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Stock Markets Plunge; Portuguese Bank Concerns; Lisbon's View; Dow Bounces Back in Later Trading; Google Ventures to Europe; Mind Reader; India Unveils Budget

Aired July 10, 2014 - 16:00   ET



RICHARD QUEST, HOST: The markets may be grim, down the best part of 70 points, but at the Stock Exchange, there's a sight to cheer you up from

the Children's Tumor Foundation, ringing the closing bell at the New York Stock Exchange. Do the business! Ah, there we are. Serious stuff. It is

Thursday, it is the 10th of July.

I'm sorry to say, here we go again. Contagion fears and sell-off, and right bang in the center, a stricken European central bank. We'll talk

about that in a moment.

Start up the start-ups. The big G wants the next big thing.

And little nippers and huge bills. Amazon is sued for letting children spend your money. Well, we'll explain.

I'm Richard Quest. I mean business.

Good evening. We start tonight with the market sell-off, as fears about Europe's banking system have resurfaced. And it all began with

jitters over a Portuguese bank and some ugly economic data to throw the European recovery into doubt.

If you join me at the super screen, you'll see just how grim it was. Red arrows across the board, from New York through to Europe. The worst,

of course, being seen in major markets like Portugal. The news took the steam out of Wall Street as well, where there was a recovery in later


You'll get the details on Wall Street, because you can see if you look at the New York trading day, which for some reason isn't showing me what

it's supposed to. We'll get the details about that in a moment.

But we also learned there were sharp falls in production in France and in Italy, and that called into question the strength of Europe's recovery.

Put it all together and this sea of red came about because of banking concerns in Portugal. This is where it began.

It started off as worries over Portuguese banks, in particular, one bank in Portugal, one of the largest, which quickly spread fear across

markets in Southern Europe again. So, we had Portugal. Then there was Spain. In Portugal, shares of Banco Espirito Santo fell 17 percent before

authorities halted trading. The biggest shareholder in the company suspended its shares and its bonds.

It says its parent company is having financial difficulty, and that sent trading in Spain and elsewhere as well. You not only had Portugal,

you had Spain, you had Greece, right across the region, it was all extremely complicated.

Let's talk to Jim Boulden to put some perspective into all of this. Jim joins me now from London. Jim, how does -- well, there's much to catch

up on. How does a bank in Portugal cause such mayhem everywhere else?

JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: Well, the worry, of course, is does this mean there's more problems systemically with European

banks? But a lot of people as the day went on, I think, Richard, started to think, wait a minute, this really is tied to one bank and one bank only.

Yes, this bank, Espirito Santo, has its problems, alleged accounting irregularities with some of its parent companies, but as Portugal says

itself that the bank has been recapitalized, we know that Portugal is selling bonds. We know the ECB is there to help banks as well. So, I

think as the day went on, we did see shares in other banks fall hard, but then they came back a little bit.

One I would worry about, though, is Credit Agricole. It does have a bit -- a stake, a big stake in this bank. And so, its shares were down

more than 2 percent --

QUEST: Jim --

BOULDEN: So, you can see there is some contagion here, but I'm not sure it should be looked on beyond the bank itself.

QUEST: Except, how can we this late in the day have a major bank in Portugal, a country that has been through the Troika process, come out the

other side, and one of the country's largest banks is in such trouble?

BOULDEN: It's the parent company of the bank that is in trouble. That's what the accusations are. And these accusations have been around

since December of last year.

We are going through stress tests again, aren't we, Richard? We won't hear about them in the eurozone until the end of the year. So, this bank

will be going or is going through a stress test like other European banks. So, we'll have to see whether it passes with flying colors.

So, I think the point is also we saw a lot of people here in Europe thinking when would this rally end? The last couple of days, markets have

been coming off. And so, I think some people did take this chance to profit-take as well in the markets, because we did see a broad sell-off

with other sectors, not just banks itself.

QUEST: All right, Jim Boulden, joining us from London. Jim, thank you for that. It's just two months since Portugal weaned itself off

emergency bailout funding, and it did so saying it didn't need a safety net. Now, the finances are under scrutiny again. The paper "Expresso," is

reporting claims that the situation is the worst possible scenario.

Pedro Santos Guerreiro is the executive editor. He joins me now, live from Lisbon. I ask you, sir, the same question I asked Jim Boulden. How

can we get so late in the day and discover a bank and a holding company and cross-sharing is in such tatters?

PEDRO SANTOS GUERREIRO, EXECUTIVE EDITOR, "EXPRESSO": Well, it's an amazing situation, actually. What you have in Portugal is a familiar group

which is going bankrupt. And this is quite a scandal, because we are not - - we are talking about, the family are highly-regarded -- or worse, was highly-regarded family of bankers, of Portuguese bankers. And it has -- we

now know that was some debt which was not in the books.

However, the situation in the bank is different. How much is the bank going to lose from this situation? Because the bank did lend credit to the

group. And this is the question that is not yet answered. And this is why the markets have gone crazy and Espirito Santo.

QUEST: Right. But the sovereign -- in other words, the Portuguese government -- the sovereign is solvent, and if we look at the numbers for

what Portugal's current debt repayment, bond sales, there's no question Portugal as a country can weather whatever comes out of this, correct?

GUERREIRO: Correct. Bear in mind that we have just left -- we have just exited a three-year bailout program, and we did it successfully. Look

at ten-year bonds of Portugal, they are now at 4 percent, which is a very fair price. And the country really is ready to accommodate, if needed, a

capitalization, an official capitalization of Banco Espirito Santo.

QUEST: Right.

GUERREIRO: There's no worry on Portugal. We are not facing a second bailout. That's completely out of the question now. What is not out of

the question is if the capital buffers at Banco Espirito Santo are enough to sustain the losses and if it will be needing some official support --

QUEST: Right.

GUERREIRO: -- to the bank.

QUEST: Is it your view that one of the things that does come out of this, there's been numerous stress tests in the European banking system so

far, another one is underway. Does this make a mockery of those stress tests?

GUERREIRO: Well, the first stress test, you can say that. But not the last ones, because we are going to have the next stress tests, which

are going to be the last ones before the banking union. And you may say that it was because of these stress tests, which are going to happen after

summer, that all these problems were discovered in a single bank.

QUEST: Right.

GUERREIRO: And we are talking about an isolated bank in Portugal. So, let's hope that the situation is resolved by then and that the stress

tests really have accomplished what their mission was.

QUEST: Pedro, thank you for putting that into context.

GUERREIRO: Thank you.

QUEST: We'll talk more about that in the future. Now, what happened in Europe, take a look at the big board. There you have the sharp sell-off

at the start of the day. A sort of tenth tepid tries to recover, the market's still off 70 points. We need to understand a little bit more

about that, and when we do, Alison Kosik is here. What happened and why?

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: You know what sort of ruled the trade today? Pessimism. Pessimism really ruled the trade because of

concern about this possible soft patch in the European economy, specifically Spain and Italy. Fears about Portugal, about its financial

system, that really rocked trading as well.

Now, the good thing is that we saw stocks really take a hit at the open, they clearly came back. We see a sharp decline, not as sharp as it

started out.

QUEST: So, are you saying hold your nerve?

KOSIK: Of course. Put this in perspective: we are still in the middle of a very strong bull run. How strong? The S&P 500 is up almost

200 percent since hitting bottom in 2009. Think about that.

QUEST: I'm making a note of this. What was the number?

KOSIK: Two -- up almost 200 percent since hitting bottom in 2009. This bull run still continues --

QUEST: My portfolio, I have to say, looks nothing like up 200 percent.

KOSIK: Well, but this is what the stats say --


QUEST: I don't --

KOSIK: -- this is putting it in perspective.

QUEST: Right.

KOSIK: Don't panic.


KOSIK: But we shall see how the next few days of trading or the next trading day of the week goes. Keep in mind also, it is the slow time in

the summer, not as many people out there trading. That also makes things a lot more volatile.


QUEST: Are we seeing that in volatility?

KOSIK: We are seeing volatility pick up, yes. Because fewer players are in the game.

QUEST: Yes, absolutely. All right, good. Thank you very much.


QUEST: Making sense of it all. Now, when we come back after the break, love it or hate it, controlling a computer or a phone with your

voice has become commonplace. In a moment, new technology that goes way beyond that. QUEST MEANS BUSINESS.



QUEST: Today, Google Ventures said hello to Europe. Now, this is Google's venture capital arm, and it's establishing a $100 million

investment fund based in London. Hello, Europe, there is money to be handed out.

Google says for start-ups to succeed, they need more than just money. They need help with engineering, certainly with design, and usually and

almost definitely with marketing. Since 2009, Google Ventures has been giving all of that to some of its United States ventures, babies, if you

like. And there have been sizable greatest hits.

Google Ventures poured $250 million into Uber. Now, that was into only last year. Now, the company is expanding globally, it's reaching 120

cities, and of course is in a fierce battle here in New York, where it slashed the cost of its rates to compete with yellow cabs.

Then you've got Nest. Nest makes technology for smart home appliances. It was in Google Ventures' portfolio, then Google bought it

outright for more than $3 billion. Remember though, Nest had a very nasty issue with its thermostats when, of course, they were recalled because of

issues in how they were working and safety.

Then you've got HomeAway on the vacation and home rental scene. Long before Air B&B had even B&B'd out of its B. Google Ventures got in early,

and it's been involved with the company since 2010.

So, Russ Shaw joins me now. He is the founder of Tech London Advocates, a group that supports start-ups in the tech center. Should we

be celebrating? There'll be some people seriously concerned that Google Ventures has got this vast pot of money and it's just going to be the bully

on the block.


RUSS SHAW, FOUNDER, TECH LONDON ADVOCATES: Hi, Richard. I think we should be celebrating. I think this is a real vote of confidence, not only

for the broad technology sector in Europe, but for London's technology sector.

We're seeing more and more investors put their money behind tech start-ups, particularly in the greater London community, and I think this

an exciting step.

QUEST: What does Google want in return? Stakes? Ownership? Ultimately to take it onboard if it's successful?

SHAW: Well, I think potentially all of those. Obviously, what they're trying to do is get in on the early side of many of these promising

start-ups that are emerging. They have their own strategy in terms of which sectors of the market they're going to look at and which sectors they

want to invest in.

And so, this is a great opportunity for them to get in early. They've been doing this successfully in the US, as you've just mentioned. Now,

they're getting ready to do the same thing across London, the UK, and the rest of Europe.

QUEST: There is the fear -- I'm trying not to be dog in the manger, but because of course --

SHAW: Sure.

QUEST: -- there's clearly the need for VC to bring on ideas. No question about it. It's just that, these days, when people here the word

"Google," they start to have the hackles on the back of the neck go up a bit.

SHAW: Well, I think for the technology sector, and particularly for the role that they're trying to play here, I think most people are saying,

look, this is a welcome thing. As we look at our emerging technology sector here in London, the two things that we need are access to talent and

access to funding.

And clearly in this instance, Google is bringing access to funding by investing $100 million. They're a big organization.

QUEST: Right.

SHAW: They've got lots of access to talent, and they've got lots of mentors and advisors and engineers to help these start-ups. So, I think on

balance, this is much more of a good thing than not.

QUEST: Let's just talk about that finally, in the end. Because --

SHAW: Sure.

QUEST: When I say anybody can write a check, I don't mean I could write a check --


QUEST: -- or maybe you could, you're a much wealthier man than me. But anyone --

SHAW: No, I wouldn't say that, Richard.


QUEST: But anybody can write a check. But this idea that getting involved, mentoring, greenhousing, as we use to call in in the old days,

this --

SHAW: Sure.

QUEST: -- this idea, how significant is that in the equation?

SHAW: Well, I think it's very big, because when I talk to a lot of the start-ups through our advocates group, the one thing that many of them

say is, look, we need to get people to help us. We need great advisors, we need great board members. We need people who've been there before, who've

done this before, who can coach us, guide us, mentor us.

And I think Google coming in not only just to write a check, as you say, but to come in with advisors and expertise, I think for many of these

start-ups, they can't get enough of it.

QUEST: Right.

SHAW: I've set up this triage desk at Tech Tub at Google campus, and there are so many start-ups who are coming in saying I need help with this,

I need help with that, and Google is in a good position to do that.

QUEST: Sir, thank you for joining us from London this evening. I appreciate you taking the time. Good to see you, come back again, please.

SHAW: Great. Thanks, Richard.

QUEST: Now, today, the phrase "hands-free" takes on a new meaning: harnessing the power of pure thought. An app's just been launched which

enables Google Glass users to control the device using only their mind. CNN's Erin McLaughlin has put her mind to the test.


ERIN MCLAUGHLIN, CNN INTERNATIONAL CORRESPONDENT: I'm taking a picture of a bowl of fruit with my mind.

MCLAUGHLIN (voice-over): It may seem like something out of a science- fiction movie, but this is real. Thanks to a new Google Glass app, I can take a picture and post it to Twitter or Facebook using the powers of

concentration. No hands, no voice involved.

MCLAUGHLIN (on camera): Feeling very cool right now.


MCLAUGHLIN: Extra cool?

MCLAUGHLIN (voice-over): The app requires a Google Glass and an EEG machine.

KIRTON: That is reading your levels of your brain waves, and it is interpreting it as a level of concentration. We're then -- taking that

output and using it to control the Google Glass.

MCLAUGHLIN: So, the goal is to concentrate on anything and move the bar on the Google Glass viewfinder to the top of the screen to take a

picture. The more you concentrate, the higher the bar goes.

KIRTON: Concentrate on anything that helps you concentrate. So, think about times table, think about driving.

MCLAUGHLIN (on camera): Multiply -- I multiplied five by four.

MCLAUGHLIN (voice-over): Concentrating can be tricky.

KIRTON: This is pretty impressive that it's been on the screen. So, you're definitely maintaining a level of concentration.

MCLAUGHLIN (on camera): I think not talking helps, so I'm just going to be doing times tables in my head. I did it! Yes!


MCLAUGHLIN: That's so exciting!

MCLAUGHLIN (voice-over): Concentrate again and the picture posts to Twitter.

KIRTON: If this is the first experiment that we have into thought- controlled navigation, that will be really exciting, the idea that you no longer need to touch buttons on your phone, that you just think is pretty


MCLAUGHLIN: The developers have made the code available to anyone who wants to take a look. The hope is that others can build on their

technology so that one day we might be able to make more things happen solely using the power of the mind.

Erin McLaughlin, CNN, London.


QUEST: Whether we like it or not, I think, we're just -- we've just had a glimpse of the future. Still to come on QUEST MEANS BUSINESS, new

spending plans in the world's biggest democracy, India's $300 billion budget. But will it do the trick? We'll talk about it next.



QUEST: India's new government unveiled its first budget, saying the country's on track to return to super-fast economic growth. The finance

minister, Arun Jaitley, says sustained growth of 7 to 8 percent a year is achievable, but it won't happen overnight. And he put the stress on fiscal


Now, the last government's target of a budget deficit of 4.1 percent of GDP, that 4.1 percent remains. There was encouragement for oversees

investment. The cap on foreign shareholding in defense and insurance, that cap is being raised. It can now go up to 49 percent.

One of the big issues in the Indian economy is the availability and the restrictions on inward investment, whether in distribution, even

supermarkets, and now, of course, in these other areas.

There were promises of better living standards for all, universal access to electricity and toilets, improved education for girls. Jaitley

says the government's determined to create a strong India.


ARUN JAITLEY, INDIAN FINANCE MINISTER: Allow me to assure this honorable house that we have taken up this challenge in the right earnest.

We shall leave no stone unturned in creating a vibrant and strong India.


QUEST: "Vibrant and strong." The finance minister has promised action on subsidies, yet hasn't spelled out what that means. Tens and

millions of Indians rely on subsidies food, fuel, fertilizers. It's one of the issues that's cost $40 billion a year and, of course, the experts say

it's unsustainable.

Previous governments have tried to cut that bill. There was so much resistance, they fell apart. As Mallika Kapur reports, India's subsidies

may be the limiting factor on economic growth.


MALLIKA KAPUR, CNN INTERNATIONAL CORRESPONDENT (voice-over): It's one of the world's largest rail networks, about 70,000 miles of track, more

than 7,000 stations, around 24 million passengers daily, and it doesn't cost much.

KAPUR (on camera): Traveling on this train is cheap. A ticket that takes me from one end of Mumbai right to the other tip can cost as little

as 50 cents.

KAPUR (voice-over): That's because it's heavily subsidized. Owned and operated by the government of India, the Indian Railways loses around

$40 billion every year due to subsidies, leaving little scope to upgrade it.

In June, India's new Modi-led government announced an almost 15 percent price hike, the steepest in 15 years. It was one initiative for

India to turn its struggling economy around, but it was forced to scale back the increase after protests by people who've lived off government

subsidies for decades.

Subsidies account for 2.4 percent of India's GDP. That's much more than India, currently growing at about 5 percent, can afford.

SHUBHADA RAO, YES BANK: Subsidies, we all know, are the most inefficient mode of funding your own growth, and be it on petroleum or food

or fertilizers, all three subsidies have had a huge negative impact on the ability for government to be able to carry out productive expenditure.

KAPUR: For example, manufacturing. It currently contributes to just over 15 percent of GDP. If this sector grows, it would lead to more job

creation, to more investment, and to more growth.

ONNO RUHL, WORLD BANK: India needs what we call a double-double. It needs to double its growth rate, not quite 8 percent, which you mentioned,

I think is a really good growth rate. But it needs 30 years of that.

But it also needs to double the impact of that growth on poverty alleviation. So, this is the moment where the government has the

opportunity to actually put that on the rails and get it going and restart that 30-year march. This is the moment.

KAPUR: Here in Mumbai, the stock market is hovering around record highs on optimism India's business-friendly prime minister has got the


Mallika Kapur, CNN, Mumbai.


QUEST: Eswar Prasad joins me now. He's the senior professor of trade policy at Cornell University. Good evening, sir, thank you for being with



QUEST: The issue, problem here now, as Mallika makes clear in her report, all these Indians voted for a government, and now they've got to

live with the very harsh or more austere policies that this government was actually going to introduce.

PRASAD: The good thing that the government could do, actually, is provide more efficient ways of transferring money to the poor. The problem

with the subsidies, as was referenced in your report, is not just that the benefits don't reach the intended recipients, they're very costly, but they

also introduce all sorts of distortions in product markets.

There's a much more effective way of getting the benefits to those who need it. This is cash transfers. The previous government started this

process, and I was hoping this government would push forward more aggressively, but they seem to be holding back.

QUEST: The new government's fundamental principle of achieving 7 to 8 percent, the minister says it's achievable. Is he right?

PRASAD: It's certainly achievable if India is willing to put in place some very hard-nosed reforms. But this budget, as it turns out, is not a

package of big bang reforms, as many had been hoping or expecting.

What it is instead is a very pragmatic and realistic budget. It recognizes the political and economic constraints and focuses on macro

economic stability. That is, maintaining fiscal discipline, trying to bring down the inflation problem, trying to keep the current account

deficit under control, and introduce a small package of reforms. So, what this government seems to be trying to do --


QUEST: Yes --

PRASAD: -- is saying they're going to start off slowly and implement, and that's the key thing.

QUEST: But this -- that might be one form, but if -- it's always said if you don't do the hard work in the early days, particularly as Modi got

such a mandate for change, if you don't do the hard work now, by the time it's turning round to doing it, you'll never get around to it.

PRASAD: That's certainly a fair point. And in fact, I'm rather disappointed that even on subsidies, where thing could have been done that

would not have cost money, that would not have hurt the poor, would in fact have helped the poor and would have benefited the economy overall, those

steps are not taken.

There was no real mention of things like labor market reforms that are very important to get the manufacturing sector going. So, there are many

lost opportunities in this budget, and it's not as dramatic a set of reforms as one might have hoped for.

QUEST: We hope you'll come back again, sir, and help us understand those reforms as and when they come through. Thank you for joining us from

Cornell tonight.

The World Cup, Argentina one match away from becoming world champions. At home, the government could be days away from a major financial defeat.

We'll take a look at the woman who's trying to keep the disaster at bay.


QUEST: Hello, I'm Richard Quest. There's more "Quest Means Business" in just a moment. This is CNN, and on this network the news always comes


Washington's top intelligence official in Germany has been expelled from the country. It comes after two Germans were allegedly caught spying

for the United States. Chancellor Angela Merkel said the allegations were, in her words, "Serious." U.N. secretary general is calling for a ceasefire

between Israel and militants in Gaza as cross-quarter attacks intensify. Palestinians say 81 people have been killed in Israeli airstrikes in Gaza.

Israel says two soldiers were wounded today in a rocket attack on southern Israel.

Iraq says Sunni extremists have taken control of nearly 40 kilograms of uranium compounds. Officials say militants took it from the University

of Mosul. U.S. officials told CNN the small amount of uranium is not weapons grade.

Concerns around the solvency of Portugal's biggest bank rattled investors across Europe. Shares in Banco Espirito Santo tumbled 17

percent. Markets from Portugal to Italy and Germany fell sharply. The bank's biggest shareholder admitted its parent company was in financial


Brazil's president has told CNN that Brazilian football stars should stay on home turf. The legacy of the World Cup will be good for the

country says Dilma Rousseff as she tries to cheer up a nation devastated by a 7-1 defeat to Germany. The president says long-term benefits will come.


DILMA ROUSSEFF,VIA TRANSLATOR: The fact is that Brazil has organized and staged a World Cup which I do believe is one of the best World Cups,

and that is largely due to the Brazilian people and their ability to offer and extend hospitality and welcome supporters from all over the world. And

I do hope and I'm certain that the whole world will recognize that as a fact.


the world but also here in Brazil about the cost of these stadiums, about the $14 billion that was spent on these stadiums compared with $4 billion

for South Africa in 2010. People were saying, you know, why don't we have better schools, better education, better transport, better infrastructure?

Do you worry? Do you believe that they will start up again after the Finals?

ROUSSEFF: In the arenas and the different stadiums, 8 billion Brazilian reals were spent. Roughly speaking, about $4 billion U.S.

dollars were spent in the building of these arenas. And the expenses made to build the arena were funded by the government - 1.7 trillion Brazilian

reals were spent in health and education in the same period, which is approximately $850 billion U.S. dollars. And all of these investment will

be available for Brazil after the World Cup.

All these stadia arenas - take airports for example. In 2003, we had 30 million passengers traveling by plane to Brazil, and that figure went

up to 113 million on 2013. So quite clearly we're building airports for ourselves. And when I mentioned earlier that Brazilian football must be

renewed, Christiane, what did I mean? Well I meant to say that Brazil can no longer keep on exporting football players. Exporting football players

means that we give up the main attraction that can help stadiums be crowded with supporters. After all, what is the biggest attraction that a country

like Brazil has to attract supporters to stadium? It's football supporters and players.

There are many great football players who have been away from Brazil and working away for many years now. The renewing football in Brazil

involves the realization that this is a country that is so passionate about football, it's totally entitled to have its own players working

domestically, therefore not having to export.


QUEST: That's the Brazilian president, and if you're watching in Europe, you can see that exclusive interview in probably around half an

hour from now, which is of course on CNN. Fans in Argentina have got two things to celebrate. Rival Brazil took a pounding and their own national

team won through to the World Cup Final. Not even that could entirely distract some Argentinians from their own economic problems.

According to Bloomberg, amid the crowds parting last night, victory above the nationalist song, some people were heard chanting, "Abuse" for

what the president has called financial budgeters. They are the bondholders who are rejecting Argentina's terms for a debt swap. The crowd

reportedly chanted, "Vulture funds - stop messing around, agree to the swap!" Hopefully they said it in something a little catchier them those

phrases. Argentina's President Cristina Kirchner is receiving Russia's Vladimir Putin this weekend for a series of economic talks. CNN's Paula

Newton took a close look at the woman who's promised to stand up to the so- called 'vultures.'


PAULA NEWTON, INTERNATIONAL CORRESPONDENT FOR CNN BASED IN CANADA: As the leading lady in her country's financial drama, Argentinian President

Cristina Fernandez de Kirchner has crafted a gripping thoughtline (ph) worthy of an epic tale. This was her comeback to a U.S. Supreme Court

ruling in June ordering her country to pay up for past debts.

CRISTINA FERNANDEZ DE KIRCHNER, PRESIDENT OF ARGENTINA, TRANSLATED BY NEWTON: We will not allow ourselves to be extorted by those that

speculated and profited from misery -

NEWTON: -- she said. At issue in 2001, Argentina defaulted on $93 billion of its debt. For years some creditors have waged a court battle to

force Argentina to pay back 100 percent of its debt, not a portion of it as other creditors have agreed to. Now the U.S. court decision says Argentina

must pay in full.

KATHRYN ROONEY VERA, BULLTICK CAPITAL MARKETS: She is up against a wall in that Argentina faces very view recourses and really has very little

negotiating power at this point.

NEWTON: But you wouldn't know it from the President's composure. She is steadfast in her accusations that the creditors are vultures picking

apart her country.

DE KIRCHNER, TRANSLATED BY NEWTON: We offer to those so-called 'vulture funds' a (inaudible) from us similar to what we are already paying

to others -

NEWTON: --she says.

DE KIRCHNER: -- with the same discounts and timelines. That is equitable and that is fair.

NEWTON: Widowed in 2010, her husband Nestor Kirchner was her closest political ally and confidante. Since then she has been a solitary figure

battling cancer while trying to revive her country's economy. She is admired and respected by many Argentinians but is now more intensely

scrutinized as the economy falters. She must find a way out of this default crisis by the end of July deadline by U.S. courts.

VERA: If you think about who restructured this debt, it was her husband. So it's very improbable that Cristina would default on debt that

was lauded as the best restructuring deal ever by her own husband. But certainly, I mean, let's face it - Cristina has faced a collapsing

popularity at home, so she needs to resurrect her image and preserve her legacy.

NEWTON: The President continues to match her nationalism and her rhetoric with the financial reality. Right now she is negotiating,

something she now feels is best for her country and her legacy. Paula Newton, CNN.


QUEST: A house on fire. That's how my next guest describes Amazon. Find out why the company is searching for a fire hose. Fascinating tale,

in a moment.


QUEST: Amazon is being sued in the United States by the Federal Trade Commission. The regulators accusing Amazon of illegally charging parents

for things that children bought on games on Amazon's Kindle Fire tablet. It's called 'in-app purchases.' So, you get the idea. When you're playing

- when players are playing - you pay for tokens, stars and do all that sort of thing. You get the idea. It all adds up to millions of dollars.

Amazon lets children click and buy and the no need for any parental consent. A few moments ago, Amazon responded to the FTC's complaint,

saying it's an understatement to say that it's deeply disappointing, the commission's unwillingness to depart from precedent set with Apple despite

our very different facts. All in all, Amazon is being told by the regulator that it needs to clean up its act, that it's not good enough to

let children spend parents' money with the click of a button without the parents knowing what's happening.

Malini Mithal oversaw the Amazon case. I asked her if the Federal Trade Commission believes it's wrong to allow children to make purchases.


MALINI MITHAL, ASSISTANT DIRECTOR, DIVISION OF FINANCIAL PRACTICES, FTC: We allege in our complaint that Amazon billed parents and other

customers millions of dollars of unauthorized charges by kids in gaming apps. And kids, as you said, for much of the time period at issue could

rack up hundreds of dollars of charges, simply by clicking buttons. We allege that that's a serious problem. Thousands of consumers complained

about this practice, and in fact, in internal Amazon e-mails, employees refer to the situation as a 'house on fire."

QUEST: Right. Now the interesting thing about this is because I can hear some viewers immediately saying, 'Well hang on a second, where does

parental responsibility come into this? Because surely parents have a certain duty in all of this.'

MITHAL: Sure. The key here is to provide parents basic information about charges, so that they know when they should and shouldn't hand a

device to their children, when and when they shouldn't enter a password, and that's something that we allege Amazon failed to do. It failed to

abide by the basic tenet of consumer protection that whether you're a mobile app provider or whether you're a platform or a brick and mortar

store, you must get people's consent before charging them.

QUEST: Right. And the other side to this of course is - that makes it egregious in your view I would imagine - is that Amazon knew this. They

knew they had a 'problem.' So it's not as if they're suddenly, 'Ooh Good Lord, look what's happened.'

MITHAL: So we do allege in our complaint that the practice went on for a number of years and that internal e-mails described the situation as

a 'house on fire' in terms of the level of complaints they were getting. That being said, our focus here is on the basic tenet of consumer

protection that we so that Amazon did not abide by, and that's getting parental consent for charges or consent from anyone before you charge them.

QUEST: What do you want from Amazon? I mean we assume that they will change their practices - this has now been made clear to them. So, are you

looking for punishment that can be regarded as deterrent?

MITHAL: We are looking for money back for the millions of dollars that consumers complained about in unauthorized charges. We want to put

that money back in consumers' pockets. We also want to make sure that Amazon cannot engage in practices like this in the future, and that's why

we're seeking an order that would require them to get consent from parents before charging them in the future.

QUEST: But I come back to this idea of you're not suggesting Amazon did it deliberately, but you are suggesting that having seen a problem

existing, they did nothing to rectify it?

MITHAL: We are alleging that Amazon failed to get consent before billing consumers. We are alleging that Amazon was aware of this problem

through consumer complaints, and in fact, internal e-mails that show that this is a 'house on fire' situations in terms of the level of consumer


QUEST: Shouldn't parents have basically said to their kids, 'Don't spend money.'

MITHAL: If parents knew about how charges can be incurred, then they would have had the opportunity to take different steps with their children

or how they operate their mobile devices. However, here Amazon failed to provide basic information about charges. These were charges for things

like pet food to feed the starving pet, they could cost as much as $99 a pop, and they could be racked up in unlimited amounts by kids with the

simple click of a button. So in this situation, parents lacked the basic consent to make choices that they should be afforded the opportunity to

make, and we allege that it was Amazon's failure that caused this problem.


QUEST: Fascinating story. Of course Apple suffered the same fate. To the weather forecast now. Tom Sater is at the World Weather Center.

Good evening, sir.

TOM SATER, METEOROLOGIST FOR CNN INTERNATIONAL: Good evening to you, Richard. No problems anywhere for business travelers across Europe.

There's occasional thunderstorms here and there, but we'll start with the numbers. Very comfortable 15 degrees, cloud cover kind of keeping

temperatures down just under where they should be and there's been some rain as well. Eighteen currently in London, Bucharest 22, Istanbul 27.

They're going to be in the 30s again in Athens.

Here's our storm system. It continues to spin. It's covering such a broad area of Europe though. It continues to fire up storms across

Germany. In fact, it's been interesting to note that there's been lightning in the skies of Germany ever since they scored their first goal

on Brazil, I kid you not. Fifty-four millimeters in a few areas, a little bit heavier in Croatia and Romania getting around 63.

So as you look in closer here, keep in mind the Tour de France still going on. It's a little bit further to the north but we continue to have

this conveyor belt of rainfall that moves in for the cyclists and the thousands of fans that are lining the streets. So from Epernay over to

Nancy, 18 degrees. Again, rain on the 7th stage for Friday and may end a little bit lighter, but it could be heavier for the beginning of stage 7.

This area of low pressure will start to kind of spin around. There's a big trough in the Jetstream, so it's going to kind of keep it home to where

it's been hanging around for some time, and that'll generate more in the way of daytime thunderstorms that'll continue to trail into some of the

early evening hours. Here's where we have a level 2 as you could see it up to the north, so still the lightening will continue in the skies through

parts of Germany. Your high temperatures on Friday near 30 in Madrid. In the lows as mentioned in Athens, and about 26 Bucharest, Kiev 27, Berlin


Got to take you into Asia though where the strongest typhoon of the year made landfall as a tropical storm. We've talked about that in Kyushu.

The system has now moved away from mainland Japan. But wow look at the waves here. This is the southern coast of South Korea churning the seas,

creating typhoon gusts even just off the south of parts of Kyushu. Kagoshima a good 98 kilometer per hour winds and heavy rain to boot. But

it wasn't just here, it was up to the north where a cold front produced just as much rainfall as the tropical storm did as well. But when you look

at the damage - this is what we were - hope - unfortunately looking at would be the case - landslides. You think this is something, take a look

at this video. You don't get any closer to a landslide than from this.


SATER: That is the power of nature. Unbelievable. Japan's transport ministry unveiling this camera which unbelievably stood in place and there

are fatalities unfortunately with this. And we knew this would be the case in this high terrain. Now that we have Neoguri coming to an end, -- we'll

put it in the books - here comes our next one, Richard. We're going to watch this become a typhoon, and it looks like it has its eyes on Northern

Philippines. And of course we will keep you posted.

QUEST: You have busy times ahead , both the typhoon season in Asia, the hurricane season in the Atlantic.


QUEST: We will be busy in the weeks ahead. Tom Sater, Thank you, sir. Have a good evening.

SATER: You're welcome.

QUEST: Now, still to come on "Quest Means Business." We've had ethical investment funds, we've had greed funds. What about investing in a

feminist fund? Now's your chance.


QUEST: Barclays has launched an index it says will allow you to track the performance of companies led by women. It's called the Women in

Leadership Index and it includes U.S. companies with either a female chief exec or a board that has women in at least a quarter of its seats. The

research group, Catalyst, says women occupy just 17 percent of board seats of Fortune 500. Of the Dow, this is in the Dow - 30 in the Dow

Industrials. You've basically only got two companies that are led by women - IBM is led by Virginia Rometty and at DuPont, Ellen Kullman is the chief

exec. On the other side of the Atlantic, the European education commissioner says she's worried that the next commission may not have

enough women.


ANDROULLA VASSILIOU, EDUCATION COMMISSIONER, EUROPEAN COMMISSION: Female commissioners are very worried that the next Commission may not have

sufficient number of women. So we decided that we are now in the course of drafting a letter to be signed by all female commissioners addressed to the

President-Designate Juncker asking him to appoint at least ten women in the next Commission.


QUEST: Women in commission is in government but women in business -- . I'm joined now by Barbara Byrne. She's the vice-chair of Barclays

Investment Banking Division, also one of the most powerful women in finance according to "American Banker."


QUEST: There you are, maybe you never knew. Let's talk about this index - the purpose - why bother?

BYRNE: Why bother. Because that which gets measured gets done, and it's an industry - finance is an industry - that has principally been

dominated by men. And men in particular will perform to measurement and goals. And markets do as well. And so because we are - we are - a very

big index house, because Barclays could do this, we have a tremendous number of indices, and you'll see them quoted. We built something that

actually measures performance of companies managed by senior (ph) women.

QUEST: But the fascinating part of such an index, of course, is how people will then compare the performance of that index to a wider market or

to other indices -

BYRNE: Indeed as they should.

QUEST: -- and that's the only reason to have an index (inaudible) -

BYRNE: That's right, that's what it's for.


BYRNE: And so what's really interesting is that an index is market- weighted. It's a pretty complicated thing to build. You build it across ten industries. What's interesting about this index is there's only 85

companies in it because there aren't enough companies that meet the criteria for liquidity and size and that we set to even get to the 100.

QUEST: Isn't there a danger that either it proves a point that companies with high degrees - number of - women in senior places perform

better, or it shows the opposite which of course would be shooting it in the foot and says that they don't perform as well.

BYRNE: I think there's no danger at all. It's all about transparency. Markets need to be transparent -

QUEST: Well -

BYRNE: -- and actually if we back test the index, the index shows, back testing, that it's about 1 and 1/2 percent better performance than the

S&P 500.

QUEST: Right, so you are making a political point here.

BYRNE: Oh, no, it's not political.

QUEST: Of course you are.

BYRNE: Finance are numbers, it's a numbers point.

QUEST: No, no, no. That's a very - (inaudible) - one way of putting it, but the reality is simply by having this index, -


QUEST: -- which you can then say companies with a highly degree of women perform better.

BYRNE: I think what you want to be able to say is that companies that have diverse elements on their board perform either equally or differently.

And the key thing about this for me - there are 85 companies, 36 women CEOs. It's not just the 500 and it doesn't include international

companies, just domestic companies. So when you look at it, you want to have governance on the board - 25 percent's a number we chose. It's not

meant to be arbitrary, there are studies that indicate when you get 25 percent of any group, you get a diversity of opinion. So we would like to

create a index and a product that allows people to make a choice. There's great - there is real demand for social impact investing.

QUEST: And that's really the point here, isn't it? There is demand for that social impact.

BYRNE: That's right.

QUEST: And that's what this allows.

BYRNE: That's what this does.

QUEST: We're going to look forward to following this up. Thank you very much.

BYRNE: Thank you.

QUEST: I very much appreciate you coming in.

BYRNE: Thank you.

QUEST: Thank you very much.

BYRNE: Take care.

QUEST: Now, we'll have our "Profitable Moment" after the break.


QUEST: Tonight's "Profitable Moment." Europe's in trouble once again. The difficulty is at the Portuguese Bank because of a fiendishly

complicated holding arrangement between holding companies, subsidiaries, banks, cross-holdings -- up and down, backwards and forwards. It is

labyrinth-ic in its difficulty to understand. But we don't really need to understand it. All we need to know is that once again, European banks and

European issues in the financial markets are taking their toll and sending up volatility.

And yet at the same time, the ECB is holding its mammoth stress test that's supposed to put an end to all of this. Portugal's no longer a

bailout country. It doesn't even have a safety net, but it begs the question - after all these years, how can a bank the size of BES, how can

it take almost everybody down in this way? It just shows the fragility. Do not be fooled for one moment that this crisis is permanently over. All

we have got is a respite and a bit of a rest. And that's "Quest Means Business" for tonight. I'm Richard Quest in New York. Whatever you're up

to in the hours ahead, (RINGS BELL) I hope it's profitable. I'll see you tomorrow.