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European Markets Surge; Austerity in Europe; Going for Growth; Crunch Time for Apple; Dollar Up; Italian Government Talks; Horse Racing Doping Scandal; US Stocks Higher on Earnings Surprises

Aired April 23, 2013 - 14:00   ET


MAX FOSTER, HOST: Cutting back on cuts. Tonight, Olli Rehn tells me why it's time to slow down on austerity.

Anxiety over Apple. Investors brace for a tricky set of results.

And the recipe for success. Take one blender and site called YouTube.

I'm Max Foster, this is QUEST MEANS BUSINESS.

There is grim economic news across Europe, but try telling the stock markets that. We've seen big gains across the continent despite some miserable numbers on manufacturing. Analysts say investors getting ready for a possible interest rate cut from the ECB.

In London, the FTSE finished 2 percent higher. The British chancellor today saw the UK deficit fall ever so slightly and took the opportunity to defend his austerity policy against the critics.

The divisive austerity debate is raging in Europe this Tuesday amid signals the EU may be ready to relax its deficit cutting drive. There are influential voices on both sides of the fence.

This man, Goldman Sachs CEO, says the UK should stay the course without its spending -- with its spending cuts. He told the BBC the pace of austerity should be eased, but in the end, the deficits must be reduced.

Last week, IMF managing director Christine Lagarde said it might be time for the UK to reconsider its spending cuts. The IMF's chief economist, Olivier Blanchard, says the UK is, quote, "playing with fire."

Bill Gross, founder and chief investment officer at PIMCO says the UK and most of Europe is wrong in thinking that spending cuts will produce growth. He told the "Financial Times," you've got to spend money, and warned that bond traders didn't want to see severe belt-tightening without growth.

On Monday, European Commission president Jose Manuel Barroso called for states to focus less on cutting spending and more on stimulating growth. He told a think tank in Brussels that whilst the policy of austerity is fundamentally right, he thinks it has reached its limits.

Germany still backs balanced budgets. Today, its finance ministry said that Germany's austerity measures are rebuilding the trust of international investors lost in the crisis.

Well, Olli Rehn is vice president of the European Commission. He told me that as Europe's growth forecast weaken, policy-makers are adapting to the changing circumstances.


OLLI REHN, VICE PRESIDENT, EUROPEAN COMMISSION: We have, in fact, constantly adjusted our policies in order to facilitate and enable sustainable growth and growth-friendly fiscal consolidation.

To give you an example, the fiscal consolidation is moving with a slower pace in Europe this year, 2013, than in 2012. In other words, last year, the fiscal effort was in structural terms, 1.5 percent of GDP, while this year it is in the scale of .075 percent.

In the US in the meantime, the fiscal effort is between 1.5 and 2 percent, so clearly larger than that in the European Union.

FOSTER: The feeling is, though, that you're losing the argument, because whatever is being done, it feels like there's a lot of pain in Europe right now. It's not producing growth, and there isn't any sort of sense that it will, actually. There's no hard figures to give a sense that it will increase growth.

REHN: I'm fully aware of the problems related to high levels of unemployment and low growth in many European countries. That's why it is essential that we work in order to support sustainable growth and job creating through reforms, through targeted investment, and by having a sensible approach on fiscal consolidation.

But at the same time, we also have to realize that the debt levels in Europe are about 90 percent -- around 90 percent this year, and it is having a drag on growth. So, we have a very difficult balance. On the one hand, to support sustainable growth and job creating, while at the same time having a consistent consolidation of our public finances.


FOSTER: Well, Europe's two largest economies are in different gears. New data from markets suggest business output in Germany and France is out of sync. This is the picture in March. Markets Composite Purchasing Managers Index showed French output contracting as anything below the 50 mark. You can see Germany's output was expanding, moving on to this month.

Now, France's numbers rose, meaning output is shrinking at a slower pace than in March. Over in Germany, meanwhile, the number has fallen below 50 for the first time since November. That means that output has flipped from expansion to contraction. Markets chief economist says that that could act as a drag on the entire eurozone, as if we need that.

Well, Stephen King is chief economist at HSBC. We had all these figures coming out today, which didn't seem very positive, but then you look at the stock markets, and they were soaring, so explain that, if you would.


STEPHEN KING, CHIEF ECONOMIST, HSBC: It's always difficult to explain the soaring stock markets. I think this is a story about military life support.


KING: The idea is that the base is so incredibly weak, it must accelerate --

FOSTER: So, bad is good.

KING: -- the process of rate cuts or something like that.


KING: Absolutely right, yes.

FOSTER: In terms of France and Germany, those two sets of figures have been quite interesting, aren't they, from Market?

KING: Yes, yes.

FOSTER: How would you read the impact of that on the eurozone?

KING: Well, Germany's been, up until now, the supposedly strong country. But Germany depends on a lot of key areas in the rest of the world, one of which is China, which is slowing down, another which is competing with Japan on capital goods to other parts of the world. Of course, the yen being a lot weaker has hindered Germany's story there.

The other key thing that people forget often is that Germany's most important export market anywhere in the world is actually Southern Europe. So, Southern Europe is in trouble, Germany also suffers.

So, I think the problem, it's plain to see now, is that Germany, having been so competitive, is now discovering that if the rest of the world is actually pretty weak, it creates problems for Germany, too.

FOSTER: And without Germany, the eurozone is kaput, isn't it?

KING: That's one way --

FOSTER: In terms of approach?

KING: -- you could put it. Well, the reality is, that the eurozone shrunk last year, it's going to shrink again this year. And there are no signs whatsoever of any kind of recovery in any real part of the eurozone. So, the difficulties just persist, I'm afraid.

FOSTER: Was the -- is the UK interesting at the moment? In the sense that we are starting to see some positivity in the austerity program, some people would argue, in the numbers, particularly the ones that came out today.

KING: There are bits and pieces, and there's a big question about triple dips, double dips, single dips and so on. But the underlying problem is that the pace of recovery, whether or not there's another dip, is incredibly weak.

The forecasts from the Office of Budget Responsibility, which go behind the budgetary forecasts from the treasury, have been persistently too optimistic over the last two or three years. The same is really true for the forecast from the Bank of England.

So, in one sense, the UK's problem is not contraction, it's just a lack of recovery. Ongoing stagnation is a big difficulty, I would say.

FOSTER: How do you manage to make a decent assessment on whether or not austerity is working?

KING: I would say that there needs to be some kind of safety valve for austerity, that in times of particular difficulty, you want to suspend the austerity during that particular period. Unfortunately, I think there's been a far too rigid adherence to austerity over the course of the last few years.

But having said that, it's very important to recognize that those who claim that stimulus can solve all problems are often forgetting that the vast amount of debt built up in the period before the financial crisis is really why we have so many difficulties today. So, adding more debt to existing debt may not necessarily give you the results you necessarily want to see.

FOSTER: In terms of the global economy, is everything still about the emerging markets, then? Is that where people are going to get some return from their investments?

KING: Well, I think that's what people are hoping for. And of course, one of the peculiarities of quantitative easing on these other kind of liquidity schemes is that many of the benefits tend to spill over into the emerging markets, because they're not deleveraging in quite the way that we're seeing in the States or in Europe.

But even in the emerging world, things are not looking quite so rosy as they were a year or so ago. China has been slowing down, India has been slowing down quite a long way, as has Brazil. So, that's three pretty major countries which are not being quite so rosy as the case previously.

On an overall average basis, there's no doubt that emerging markets are growing much faster than developed markets, and you hope they should be, because of course they are quite a lot poorer than people in the developed world. But nevertheless, the growth rates even in the emerging world are not as strong as they were a year or so ago.

FOSTER: And in terms of the developed European economy, there is one option left for Europe, and that is reducing the interest rate, the ECB's interest rate. Do you think that's likely?

KING: It's not my central forecast, but I must say that given the data recently, there's an increasing pressure on the ECB to do something before the middle of the year.

FOSTER: That's something it can do at the moment, isn't it?

KING: There are bits and pieces they can do. There's discussion about QE and various liquidity schemes and lending schemes. But the reality is that even though central bankers have used a lot of these schemes, have not got the results they've wanted.

So, the UK's a good example of this. Lots of QE, but at the same time, the economy is not growing in the way that the Bank of England had expected.

FOSTER: OK, Stephen King, HSBC, thank you very much, indeed.

After the break, a crisis of confidence in Apple. With results due in the next few hours, investors are bracing for a bruising.


FOSTER: Investors in Apple are bracing for a profit report that may not live up to their lofty expectations. It's been a difficult 12 months for the iPhone maker. A lull in product launches isn't really helping.

2012 was a bumpy year for announcements, but they were modestly bunched up, actually, in the first half. Apple hasn't released a major new product since October's iPad mini. Since then, chief executive Tim Cook has apologized more often than he's introduced new innovations, it has to be said.

Most recently, in China, Tim Cook apologized to consumers after being condemned by the media for poor after sale service. That came not long after he said sorry for the botched launch of Apple's Maps app.

Now, while Tim Cook has yet to apologize to shareholders, he says he does feel their pain over the company's sliding stock price. It's lent support to a group led by hedge fund manager, David Einhorn, calling for Apple to return some of its $137 billion in cash to shareholders.

For more on what to expect from Apple's results, Felicia joins me now from CNN New York. What's the betting on these results, then, Felicia?

FELICIA TAYLOR, CNN INTERNATIONAL CORRESPONDENT: They're not that great, Max, and you've just outlined pretty much exactly why. There's a lot of concern about where this company is going. And future guidance is always sort of the focal point for these earnings reports.

Already, the company has lost about 25 percent of its value, going down from about $280 billion in market cap. The stock was trading at $700 or over, $700 a share, not too long ago. Now, it's around $400 a share. And you can see exactly the precipitous decline in what's happened to Apple.

The biggest concern is whether or not this company is still an innovator. Is it going to be able to release new products that have been as revolutionary as the iPhone and the iPad. The question is, probably not.

And obviously, if this is the first year-over-year profit drop in a decade, that is a major concern for shareholders. How many more iPhones can be sold? How many more iPads can be sold? That's a problem.

We've had a net income drop of about 18 percent to $9.5 billion, or about $10 a share, and that's going to be OK, but not great. An 8 percent rise in revenue is all right, but that's the weakest sales that we've seen since 2009.

These are numbers that you can't really expect the company to move forward with and expect shareholders to be proud enough to buy the stock again.

Nevertheless, there are plenty of analysts out there that still think that this is a strong company, it's just a question of how strong it will be. Their other concern, and there are plenty of experts out there wondering whether or not Tim Cook is going to be able to maintain his position.

FOSTER: Surely one solution is to dip into this pile of cash. He doesn't need that much cash, does it? What's the reason? What reason do they give for not dipping into it and helping shareholders out that way?

TAYLOR: Oh, that is such a good point, and this is something that everybody has been sort of on tinder hooks wondering about whether or not they're going to be able to finally -- and the expectation is that they are going to say something about returning shareholder -- returning cash to shareholders in some sort of dividend -- issuance.

And this is a sincere point, because we've been talking about this. They've got $130 billion of cash that they're sitting on, or are they going to make acquisitions? And that's the big question out there.

And honestly, I -- I hope that we hear something in this conference call at 4:30 Eastern Time this afternoon in New York, but I'm not exactly sure, because oftentimes, Apple is very cautious when it comes to this kind of forward guidance. And certainly a dividend would be that kind of thing.

FOSTER: Well, we'll check in with you later. Felicia, thank you very much indeed. Well, a Currency Conundrum for you in the meantime. The British pound coin celebrates its 30th birthday this week. What I want to know is, what is the average lifespan of a single pound coin? Is it 20 years, 40 years, or 60 years. We'll have the answer for you after the break.

The dollar's up against the pound, meanwhile, and the euro, and also making slight gains against the yen as well.


FOSTER: Italy's reluctant new president may be about to announce his choice for Italy's next government. It's been months since Italy held its elections with no clear winner. Senior international correspondent Ben Wedeman is in Rome for us tonight. Ben, just describe the state of politics there, for those who haven't been keeping up with it.

BEN WEDEMAN, CNN SENIOR INTERNATIONAL CORRESPONDENT: It's a complete mess. On Saturday, Max, the Italian parliament, the upper house and the lower house, reelected Italy's 87-year-old president, Giorgio Napolitano, for another seven-year term simply because they could not agree on who to elect as the president.

So, he's the compromise candidate. Now, it's his job to assign somebody to form a new government. You have to realize that the elections took place here two months ago. There's been a caretaker government running the country, if you can describe it as that.

We're expecting an announcement possibly tomorrow about who Giorgio Napolitano, the Italian president, will choose to form a new government. But there's no guarantee that that person will be able to.

But what's clear, Max, is that the right, led by Silvio Berlusconi, himself 76 years old, and the left, led by the Democratic party, really are trying to stave off a third party, the Five Star Movement, led by Beppe Grillo, that comedian turned rabble-rouser politician. They want to make sure he doesn't get anywhere near the corridors of power. Really, it's a question of the old politicians trying to keep out the new.

FOSTER: And this couldn't be happening at a worse time, of course. You've got he economy -- a lot of people very concerned about it, people even talking about a bailout of the Italian economy at some point in the future. Without this political leadership, what direction is the economy going in right now? We've got some idea?

WEDEMAN: Well, certainly at the moment, everything in this country is on hold because of it, and markets are worried about this political paralysis.

Ordinary Italians are worried about it as well, because even though this is a country that's always fared fairly well despite the politics, at a time like this, with a eurozone crisis that doesn't really seem to have an end in sight, this political crisis really makes people worry about the future of the country.

And what we're seeing, for instance, is that a record number of Italians, for instance, are traveling, are leaving the country permanently. Recently, figures were released saying that last year, 80,000 Italians permanently left the country. That's an increase of almost 30 percent.

So certainly, even though Italians have a high tolerance for instability, it looks like that tolerance is starting to wear thin. Max?

FOSTER: And speaking of Berlusconi, the one political figure that the rest of the world always sort of latches onto, he was seen today, wasn't he, in parliament with a big smile on his face? Really, what is he making of all of this? You get the sense sometimes he doesn't take it all that seriously.

WEDEMAN: Well, what he is -- he's a winner in this entire process. What we saw was Pier Luigi Bersani, who's the leader of the Democratic party, which was ahead in the polls in the elections, has really made one blunder after another.

Berlusconi has really stuck to his guns. He hasn't changed his position, so what he's looking ahead at is the possibility that his party will have a decisive role in the next government. So, despite predictions of his demise, he once again seems to be emerging from the ruins of Italian politics on top. Max?

FOSTER: OK, Ben Wedeman, thank you very much, indeed.

A trainer from the prestigious Godolphin stable of Dubai's ruling Sheikh Mohammed has admitted to using banned steroids on his horses. The trainer, Mahmood al-Zarooni, says he didn't think he was doing anything wrong, because the horses weren't racing at the time. Eleven of them have tested positive for anabolic steroids.

The UK betting agency Ladbrokes has refunded more than $300,000 of bets on horses which failed the drugs test. I spoke with CNN's John Defterios in Abu Dhabi earlier today. I began asking him what the reaction has been there.


JOHN DEFTERIOS, CNN EMERGING MARKETS EDITOR: Godolphin Blues stable is not only known here in the UAE in the home base for Sheikh Mohammed bin Rashid in Dubai, but the world over. Godolphin has a very large role to play in the world of racing, so to hear that 11 horses actually tested positive for anabolic steroids was a shock right around the world.

This is a stable that has had a very strong last five years. It doubled its wins in 2009, sustained it in 2010 and, in fact, in 2012, had its record winnings of $25 million with the Dubai World Cup making up $10 million of it. So, to see this come through was a shock.

Now, what's transpired here, I called the rulers of Dubai's office, and a spokesman actually suggested that this really lands with the trainer himself, Mahmoud al-Zarooni, who himself had said, "I made a catastrophic error."

I tried to reach the manager of the Godolphin stables, Simon Christopher, he did not return the call, but again, they put out a statement today to try to be very direct. They said it was a "dark day for Godolphin," and they said that the ruler himself was "appalled by the behavior."

FOSTER: And a particular embarrassment for the sheikh, because he's actually been involved in an anti-doping campaign, hasn't he? And now he finds out it's been happening right under his nose.

DEFTERIOS: The fact that this happened on UK soil, where Godolphin has such a large presence at Newmarket, I can't reiterate enough how much the investment has taken place by Godolphin there. So, they don't want to see this stable rocked by scandal.

And I think that's why the trainer himself apologized so profusely for this activity. He was basically suggesting here that the treatment with the steroids he didn't think was breaking the rules because the horses weren't racing. It'll be interesting to see what the British horse racing authority thinks of that comment.

I think it's also worth noting, here, Max, that Frankie Dettori, the lead jockey for Godolphin for 18 years, tested positive for cocaine use back in September before racing in France. And Godolphin, under the leadership of Sheikh Mohammed bin Rashid pushed the Tory out of the stables. It was like a zero tolerance policy. That was before the hearing for Dettori in France.

So, it'll be very interesting to see what happens to al-Zarooni going forward as a result of this, whether they'll wait for the hearing. He as a very solid track record with Godolphin, but it'll be interesting to see what the stable does as a result of the news that broke overnight.


FOSTER: Well, straight ahead on QUEST MEANS BUSINESS, alarm bells are sounding over growth around the world, but the US markets aren't listening. We're live for you in a moment in New York.


FOSTER: Welcome back, I'm Max Foster. These are your news headlines. The Boston bombing suspect is now said to be in fair condition. Investigators are continuing to question Dzhokhar Tsarnaev in hospital. A source says he told them his older brother masterminded the deadly marathon attacks, and they did it to defend Islam.

Spanish police have two men in custody they believe are connected to an al Qaeda-affiliated group. One of the men reportedly praised the Boston Marathon bombers online, and that prompted police to act. Investigators say there's no evidence of any imminent attack.

A car bomber outside the French embassy in Tripoli has injured three people. The explosion knocked down some of the embassy's front walls. Both Libya and France are strongly condemning the attack, and investigators from both countries are working side-by-side on the scene.

France's lower house has approved a bill allowing same-sex couples to get married and adopt. The French Senate has approved the measure earlier in the month. Opponents still hope to block the law by bringing it before the constitutional council.

Japan's prime minister says any attempt by China to land on these disputed islands in the East China Sea will be met by force. The Japanese coast guard says eight Chinese ships entered waters near the contested islands on Tuesday morning. China says its ships were there to monitor the movements of Japanese vessels in the area.

The US markets are continuing to climb higher off the back of strong earnings and some positive news about the housing market. Alison Kosik is in New York. I am moment, the fake tweet, Alison, but first of all, the real news.

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: The real news is what's driving the markets today. It is -- part of it is the housing market news that we got here in the US, and the other part of it is strong earnings. We're seeing stocks being led by Travelers and DuPont, both companies beating earnings estimates. DuPont also raised its dividends.

We also have our eye on shares of Netflix, they're up almost 23 percent right now after posting strong results after Monday's closing bell. It looks like Netflix signed up more than 2 million US subscribers in the first quarter, beating its own predictions.

In fact, CEO Reed Hastings says the new original series "House of Cards" had a very nice impact on subscriber growth. You look at Netflix's stock price, it's now more than double since the beginning of the year.

And you mentioned that housing data, that strong economic data on new homes sales, showing that new homes sales here in the US were up 1.5 percent for March, beating analysts' expectations. But despite those positive numbers, Max, demand for new homes is still below pre-recession levels, Max?

FOSTER: And you had a bit of a scare there earlier today. Talk us through it.

KOSIK: It sort of took our breaths away, a few dramatic moments here on Wall Street. Around about an hour ago, we saw the market tumble almost 140 points just like that in a matter of seconds. And it was based on a fake tweet sent out by AP.

It was actually -- AP had been hacked, we found out later. And what the tweet said was that there had been two explosions at the White House, that President Obama was hurt.

That is really what set the markets off; they tumbled into the red from 140 points down into the red and then immediately after that, AP sent out another tweet saying that they'd been hacked. And then within minutes, you saw the market go right back up to where it was. Amazing how headlines can drive the market, especially a very startling headline like that, Max.

FOSTER: Yes, pretty good to see that there is some rationale in the market because it came back up, right?

KOSIK: Exactly. It did. And you know, it's also an example of what happens with this computerized trading, that you know, one trader I talked to said it's an example of technology gone wild. He said, in nanoseconds, you saw the market make these wild swings, Max.

FOSTER: OK, Alison, thank you very much indeed.

Glad that scare's over.

The proposed free trade agreement between the U.S. and Europe is a ticket to jobs and growth. So says the president of the U.S. Chamber of Commerce, at least. Tom Donohue had attended a trade conference in Dublin this week, says progress is being made but it's not an easy road.


TOM DONOHUE, PRESIDENT, U.S. CHAMBER OF COMMERCE: Any major trade deal has a lot of stumbling blocks. But to be successful, you need some special reason why it's going to work. Necessity is the mother of invention.

And I believe that with the economy in Europe flat and going to stay there, and with the economy in the United States doing a little better, but with both economies fundamentally needing jobs and growth, the trade deal will get us there.

FOSTER: In terms of the meetings you've had, which is the one that really gave you a sense that this is going to happen now?

DONOHUE: Well, we were in Ireland for the trade ministers met. And then we -- those from Europe and the U.S. that were interested in the deal had meetings with the representative of the U.S. and the E.U., the government representatives, on this very subject.

And we came away Thursday with a commitment by both the U.S. and the E.U. that their presidents would in June, when they meet on the site of a meeting they'll have in June they -- in Europe, either in Ireland or in Brussels, they will initiate and direct the beginning of those negotiations and that's the critical first step.

FOSTER: In terms of the other big talking point at the moment, the E.U. financial transactions tax, obviously Britain has taken this to the next level, appealing against it. And this is a, you know, big problem between Britain and Europe right now. You've actually come down firmly on the side of Britain, think it's going to win?

DONOHUE: And there are many things we're going to do together. But we're not going to do a transaction tax in the United States. And I really don't believe they'll do it in Britain.

It is basically a tax on communities and on citizens and on depositors because what it does, it makes it more expensive to do our normal investing. Second, it reduces the economic benefit to the community.

In other words, you're going to -- you're going to make it more difficult to do the transaction there. And what do you think you do if you're in the transaction business? You go somewhere else.


FOSTER: The slowdown in Europe, that means many companies are relying on emerging markets to pick up the slack. Philips is one such company. Its CEO told me Europe's growth prospects remain weak.


FRANS VAN HOUTEN, CEO, PHILIPS: To be realistic, we think that the growth prospects in Europe will be subdued, be compensated, of course, by growing double digits in the emerging markets. But in Europe, we are still a bit in the doldrums.

Having said that, at Philips, we focus very much on the case of self-help. We think that by reducing our overhead spend by investing in innovation, we can actually accelerate the performance of Philips going forward.


FOSTER: Advertising company Publicis is also suffering because of the slowdown in Europe. Last week its shares plunged when its first quarter sales missed expectations today.

Publicis CEO Maurice Levy announced a new partnership with Twitter to work out how to make money out of its users. I asked him how he plans on doing that when he doesn't have a Twitter account or a Facebook account himself.


MAURICE LEVY, CEO, PUBLICIS: I'm not doing everything at the Publicis group. I'm having a lot of superb partners and colleagues who are doing this kind of thing. And I understand extremely well the digital age. I have made most of the decision of investing and making all the choices by myself. This doesn't lead necessarily to expose my private life on a wall of Facebook or whatever.

FOSTER: So tell us, how is Twitter going to make money?

LEVY: This is what (inaudible).


FOSTER: (Inaudible) amounts of money at least.

LEVY: This amount of money, we are speaking about hundreds of millions. And we are speaking about integrating, opening a new approach to Twitter and to the monetization of their audience.

FOSTER: What is it using, advertising or using it as a way to (inaudible) research?

LEVY: It will be advertising based on research, based on data, targeted to people who will be interested. And it could be simply some text messages as it could be. And that is something which is quite interesting. It could be some video. And there is also some new approaches that we are developing with Twitter. And we are partnering with them in order to monetize big time their audience.

So it's something which is quite interesting for Twitter, first and foremost, but also for our clients because they will have access and they will have a first access to the inventory of Twitter and also to all the innovations.

And it is interesting for us because we will be at the beginning of something new. And in our field, it's extremely important to be at the forefront of what is invented, created, and that is what we are trying to do.

FOSTER: Publicis, the whole industry is obviously under pressure. And your share prices hit quite hard last week when you reported a weaker-than- expected revenue growth figures. You're not on your own there. This whole industry's obviously suffering.

But going hard into digital and hard into emerging markets, is that the way you see getting out of here?

LEVY: We have been hit hard. But at the same time, when you look, including the fact that we lost a few percent last week, we still have the best performance of all the industry. If you look at the last year, at the last five years, on the long term, on the short term, we have the best -- the best performance.

FOSTER: Have you got any sense about when you think we'll come out of this in Europe? Can you put a timeline on it?

LEVY: I think that we will see growth coming back probably in the middle of next year. And I think that the real growth will not be back before 2015.


FOSTER: After the break, the rogue trader reinvented: the man who broke Barings returns to the finance sector.




FOSTER (voice-over): Now the answer to tonight's "Currency Conundrum," earlier I asked what the average lifespan of a single pound coin is in the U.K.

The answer is 40 years. That exceeds by far the nine-month lifespan of the 1-pound note (inaudible) replaced. During this time in circulation coins feature no fewer than three different portraits of the queen.


FOSTER: Nick Leeson is making a comeback in an industry that widely regards him as a pariah. In the 1990s, he was responsible for more than a billion dollars of losses that eventually toppled the 233-year-old Barings Bank. He served time in prison and got cancer, got divorced and eventually settled in Ireland where he's getting back into finance. Jim Boulden caught up with him.


JIM BOULDEN, CNN CORRESPONDENT (voice-over): Nick Leeson became the face of rogue trading when he attempted to cover massive trading losses while working for Barings Bank in Singapore. The loss eventually surpassed a billion dollars and Barings Bank collapsed.

His arrest in 1995 led to four years in prison and a portrayal by Ewan MacGregor in the 1999 film, "Rogue Trader," based on Leeson's autobiography.

BOULDEN: How often do you get back to England, then?

NICK LEESON, ROGUE TRADER: I get back quite a bit.

BOULDEN (voice-over): Leeson has laid low since then but is now getting back into finance.

He and his second wife, Nell, live in Ireland and he's decided to join a team of people trying to help those bankrupted by the economic crisis.

LEESON: I do get asked the question, you know, how will certain bankers feel when they see you across the table, trying to negotiate with them? And you know, some people may have a perception of me that's colored by those events. And you know, I fully understand that.

I also could have a perception of bankers from recent events.

BOULDEN (voice-over): Those recent events include rogue traders who have lost banks like Societe Generale and UBS billions of dollars.

LEESON: You talk to any banker and you ask any banker in any bank around the globe, and you know, (inaudible) rogue trading episode. In the future, the answer will always be yes. And but they will try to rationalize it on the basis that it's going to happen to somebody else and not them. And therefore that makes it OK.

BOULDEN (voice-over): For years, Leeson has shied away from work while administrators actively look to recover some money from him.

BOULDEN: So with this new venture, is there still someone out there who will be taking part of your wages? Or do you still have that hanging over your head?

LEESON: We're beyond that now. You know, I suppose legally I probably still have an injunction against me for 100 million pounds. It's -- I don't think it's been wound down.

BOULDEN (voice-over): No personal gain, says Leeson, and a lot of hardship coming on the heels of what he freely admits was his own actions.

LEESON: I regard all of that as part of the -- you know, part of the sentence, if you like. You know, I stood in front of a judge; he -- and that's accountability for me. I mean, you know, the effect of my actions was calamitous from the bank's perspective. But from my own perspective, it was prison in Singapore for a total of 41/2 years. It was divorce. It was cancer.

BOULDEN: So do you still get noticed when you come to London?

LEESON: Yes, you do (inaudible). But it's not as much as it used to be (inaudible).

BOULDEN (voice-over): Leeson says one of his goals now: changing the culture under which younger traders operate.

LEESON: Communication is another huge message. I mean, you know, I had a massive (inaudible) when I worked at the bank. And I had a huge hunger for success. And communicating and speaking about my fears was -- just didn't really (inaudible).


LEESON: No, the culture didn't -- the culture didn't approve of that.

I'm not proud of my activities as a trader with Barings Bank in Singapore.

BOULDEN (voice-over): But with the multiple bank misdeeds since Leeson, whether it's rogue trading or the banking culture, you could argue not much has changed since Nick Leeson brought down Barings Bank -- Jim Boulden, CNN, Wisbech, England.


FOSTER: Fascinating insight there.

Let's get the weather for you now.

Tom Sater is at the International Weather Center.

Hi, Tom.

TOM SATER, AMS METEOROLOGIST: Hi, Max. We've got a big problem in the central parts of the U.S., where rivers, major rivers that have, of course, barge after barge of products and commerce, are really seeing a big difference from what we had just a few months ago.

Record snowfall, it's been falling; we still have winter in many states. In fact, the last 24 hours 11 states have had snowfall. We still have heavy amounts of rain after record rainfall in Chicago over the weekend.

So we're talking about flood problems and mainly along the Mississippi River that just months ago was at historic low levels; in fact, Army Corps of Engineers were dredging the river so we could keep barge traffic moving up and down.

This is snow coverage up in areas of Canada, where the water equivalency, the liquid equivalency is still around 50 centimeters. Two weeks ago, we had temperatures still below freezing.

This past seven days, record warmth, warming up quickly and now we're having massive snow melt along with the record rainfall that's been moving into these two areas, Bracebridge and Huntsville. In fact, the rivers that run through this area cannot handle the amount of water that is quickly filling the rivers.

In fact, I want to show you some pictures up in Ontario. This is what it looks like with the amount of water that is now surging into these rivers. Everything, of course, flows to the south, and we're seeing all this water flow quickly into various other rivers, then into the Mississippi River, which was at historic low levels, mind you, just a few months ago.

Take a look at this snowfall in parts of the Upper Midwest. Rapid City, 25 centimeters; that takes the monthly total to 110 centimeters, all-time record monthly snowfall for any month in any year. We're still finding snow that's falling. But last Sunday, we had record rainfall in Chicago. In fact, several counties in Illinois alone -- 44 of them -- declared disaster areas because of the flooding.

Now let me show you, these are all warnings affecting Indiana and Illinois and Iowa, Michigan, Missouri, later it'll be Kentucky, Tennessee and Arkansas, all up and down the Mississippi River. Barges have been breaking loose.

On Sunday, we had 30 barges break loose. And last night at 10:30 in the Port of St. Louis, in St. Louis, Missouri, another 114 barges broke free, unbelievable. Coast Guard, barge companies trying to lasso them, 10 sank; two are missing. How you lose a barge is beyond me. This is the way it looks on the Illinois River as we get up into areas of Peoria, record levels.

Now I'm going to break this down for you, because the Illinois River here in Peoria runs into the Mississippi. So the crest continues to slide to the south. In Peoria right now, 51/2 meters is flood stage; they're looking at a record going past 1943 at 9 meters. In St. Louis, a little bit further to the south, it's going to not be as bad just of yet.

St. Louis, anything over 9 meters is flooding; they're looking at 101/2. So this is going to continue to be a problem, Max, that we're going to watch all the way down into Mississippi, which had just a couple months ago a level of a half a meter. They're now at 111/2. More flood problems in the U.S.

FOSTER: Yes, absolutely. Tom, thank you very much indeed for that.

Now straight ahead on QUEST MEANS BUSINESS, working in harmony as YouTube celebrates a milestone. This American firm says it's a smashing idea.



FOSTER: And an update to a story we brought you earlier in the program, a group called the Syrian Electronic Army says it's behind the hacking of the Associated Press Twitter feed that had that huge impact on the New York markets. They recovered, though.

They hijacked the account to claim there had been a terrorist attack in Washington. That tweet had no basis in truth. Stocks briefly fell as investors reacted to the fake tweet. Several news organizations have suffered hacking attacks on their Twitter pages.

Now can you remember life before YouTube? Hard to believe, but the website turns 8 years old today.


JAWED KARIM, INTERNET ENTREPRENEUR: All right. So here we are, in front of the elephants.

FOSTER (voice-over): Now this 19-second clip is the very first YouTube video posted April the 23rd, 2005. That's Jawed Karim, the website's cofounder, at the San Diego Zoo -- pretty primitive by today's standards, but Karim and his business partner sold to Google the following year for a whopping $1.65 billion.


FOSTER (voice-over): The most watched video on YouTube, that would be PSY's "Gangnam Style," with more than 1.5 billion views. The video helped turn the Korean rapper into an international superstar.


FOSTER (voice-over): YouTube has also become the number one source of viral videos, like this post from (inaudible) user showing a cat playing with a vacuum cleaner, one of the most watched this week.

FOSTER: The numbers are staggering since two hours of videos uploaded to YouTube every single minute just on mobile devices the site serves up to a billion videos a day. And it reached 1 trillion views in 2011.

YouTube also has the power to reenergize brands. It certainly brought success to this blender manufacturer.


TOM DICKSON, FOUNDER, BLENDTEC: I love my new iPhone. It does everything. But will it blend? That is the question. Let's find out.

I think I might push the smoothie button.


FOSTER: Well, the star of the video is Tom Dickson, Blendtec's founder. He joins me via Skype from Utah in the United States.

So very nice to meet you, a very big star indeed these days.

What was it that gave you the initial idea for what has become a legendary YouTube channel?

DICKSON: Well, you know, we manufacture the most powerful, fastest, quietest blender in the world. And I originally thought that if we got into all the major coffee shops and smoothie shops and scoop shops that then people would beat a path to our door to purchase our blenders.

But it didn't work that way. Our brand just wasn't developed. So I hired a marketing (inaudible) and he came to me one day and he saw -- he had seen a pile of sawdust. I had been blending some lumber and trying to break the blender. We have the strongest blender in the world. And just impossible to break.

And so he said, "What's going on?" And he came to me and he said, hey, could I -- what's my pledge? I said, you're the pledge. He said, "How about $50?" And so he purchased a rotisserie chicken, red candles, marbles, rotisserie chicken, bunch of things. And then we videoed me blending some of that stuff.

And he approached me five days later. He said, "We've hit a home run. We have 6 million views on YouTube." And I said (inaudible) no idea what YouTube was.

FOSTER: This is a -- there's a really interesting example, isn't it, because why people point to your example is because it seems to work for everyone. It works for you, because you're basically advertising and you're advertising now very cleverly.

It also works for YouTube, because they're bringing in a little of the traffic. But people are entertained by it as well. So in terms of YouTube, what do you think you've learnt about it, because certainly YouTube seems to be going in the direction in terms of strategy as trying to own video in many ways.

Do you think it can? What is YouTube at its most powerful?

DICKSON: Well, I think, you know, for us, what it's been is a real blessing, because it's built a brand that people just didn't know. And you know, it's got to be entertaining, as you mentioned, and it's got to be authentic. I mean, this really happens. I really blend this stuff. And so, you know, our sales are up almost 1,000 percent.

And now people know who we are. There's half a billion people around the world -- or a half a billion clicks on that -- on the site and on the Internet. And we have 550,000 subscribers. So people, as soon as I put up something new, people get to see it. And if I don't put us something up, they say, what happened?

And, anyhow, so they miss us if we don't put anything up and when we do, they say thank you; it's good to see you again. We thought you died.


FOSTER: You've got a job for life. Tom Blendtec -- Tom Dickson for Blendtec, thank you very much indeed for joining us on the program.

We'll have a final check on the markets after this short break.



FOSTER: The U.S. markets then, stocks actually climbing due to strong earnings and a positive reading on the housing market. That's all overshadowed some gloomy news about the pace of global growth, though.

The Dow and the S&P 500 gained nearly 1 percent. Netflix stocks are up 23 percent. After the video streaming service reported strong subscriber gains. The Dow currently up (inaudible) percent.

That is QUEST MEANS BUSINESS from London. I'm Max Foster. Thanks for watching. A check of the headlines is coming up for you next.



FOSTER (voice-over): The Boston bombings suspect is now said to be in fair condition. Investigators continue to question Dzhokhar Tsarnaev in hospital. A source says he told them his older brother masterminded the deadly marathon attacks, and they did it to defend Islam.

As French police have two men in custody they believe are connected to an Al Qaeda-affiliated group. One of the men reportedly praised the Boston Marathon bombers online. And that prompted police to act. Investigators say there's no evidence of any imminent attack.

A car bomb outside the French embassy in Tripoli has injured three people. The explosion knocked down some of the embassy's front walls. Both Libya and France are strongly condemning the attack. And investigators from both countries are working side by side on the scene.

France's lower house has approved a bill allowing same-sex couples to get married and adopt. The French Senate approved the measure earlier this month. Opponents still hope to block the law by bringing it before the constitutional council.


FOSTER: That's a look at some of the stories we're watching for you this hour on CNN. "AMANPOUR" is next.