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QUEST MEANS BUSINESS
Greece Won't Cooperate With Troika; Athens Market Falls; European Markets Down; French PM Says Greece Must Stay in Eurozone; Europe Hopes Greece Will Cooperate; US Economic Growth Stumbles; Icahn Says Stocks Don't Reflect Reality; US Stocks Down on Disappointing GDP; Former IMF Chief Economist Says US Growth Solid; Facebook Launches Super Bowl Second Screen; Tomorrow Transformed: Sharing Photos in 3D; Jay-Z Buys Aspiro for $56 Million
Aired January 30, 2015 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(NEW YORK STOCK EXCHANGE CLOSING BELL)
POPPY HARLOW, HOST: So much for the market rebound. US stocks suffer heavy losses for the third time this week. It is Friday, the 30th of
Tonight, it's not me, it's you. The new Greek finance minister tells the Troika this relationship is over.
Growing pains in the United States. A sharp sell-off at the end of the day on Wall Street. The latest GDP numbers coming up short.
And so-called chaos at the Russian Central Bank. Moscow cuts rates, and the White House celebrates.
I'm Poppy Harlow and this is QUEST MEANS BUSINESS.
Good evening and welcome to the program. Tonight, the new Greek government is sticking to its guns saying it will not cooperate with its
paymasters or ask for an extension to the bailout. Finance minister Yanis Varoufakis welcomed eurogroup president Jeroen Dijsselbloem to Athens on
Friday. At a news conference afterwards, though, an awkward moment during a technical glitch.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: No, the mic works, but the interpreter doesn't hear the minister.
YANIS VAROUFAKIS, GREEK FINANCE MINISTER: Oh, the interpreter doesn't hear me. I wonder why?
(END VIDEO CLIP)
HARLOW: With the translation restored, both men offered their very different views about the next steps for Greece.
(BEGIN VIDEO CLIP)
JEROEN DIJSSELBLOEM, PRESIDENT OF THE EUROGROUP: I realize that the Greek people have gone through a lot for the past few years and had to
endure many tough measures. However, a lot of progress has been made putting Greece back on track, and it is in my mind important not to lose
VAROUFAKIS (through translator): Our government will proceed seeking the utmost cooperation with the legal institutions of the eurozone and the
International Monetary Fund. But with the Troika Committee, which aims at implementing a program whose logic we consider anti-European, with this
committee, which according to the European Parliament is poorly structured, we do not aim to work with.
(END VIDEO CLIP)
HARLOW: Let's get another perspective on this. Anders Borg is the former Swedish finance minister. He joins me on the line from Sweden.
Sir, you just heard what Greece's new finance minister said there, using the words "the logic being applied here is anti-European," making it clear
they're not going to work with the Troika as is outlined right now.
I'm wondering, you were the Swedish finance minister when this bailout decision was being made. Is this new stance feasible for Greece?
ANDERS BORG, FORMER SWEDISH FINANCE MINISTER (via telephone): Well, I don't think that what the finance minister said will be the final and last
word on this. I would presume that the Greek government is now doing some serious damage control. They are completely depending on the ECB providing
liquidity to the banking system.
There are some finance decisions that have to be made in the near future. We have the eurogroup the 16th of February. So, I would assume
that the eurogroup has a pragmatic approach on how to deal with the issue.
And if this would be the final word from the Greek government, there would be some cold steel applied, and I would assume that the markets would
react heavily to this on Monday. So, therefore, I think that the best assumption is to think that the Greek government is now doing some serious
damage control and talking to the European institutions and trying to deal with the situation.
HARLOW: After the World Economic Forum in Davos, Switzerland, you wrote, "Strong, early action seems more important than sticking to a preset
plan." Do you believe the new Greek government is capable of pushing through the tough structural reforms that you're clearly advocating here
BORG: Well, to my mind, the eurogroup at the end has to be pragmatic against the Greek government, but that cannot be done on -- from the
perspective that they are shutting down relations and refuse to deal with the eurogroup on the basis of the arrangement that already has been made.
So, I think they are putting the eurogroup in a very, very difficult position. I would assume that the eurogroup is pragmatic and willing to
negotiate, but that has to be on the back of some pragmatist model of government, that they have to return to the negotiating table, they must
respect the forms of cooperation in Europe and they must respect the obligations that the Greek government has taken on before.
HARLOW: In 2012, sir, you predicted that Greece would leave the eurozone within six months. That didn't happen, but it's still something
that is very much up in the air, very much in question. Do you believe that Greece will remain in the eurozone?
BORG: I would hope that they would remain. If the position that the finance minister now is taking in Greece, that would be very, very
difficult. So, I would assume that the Greeks now are doing -- attempt to do serious damage control.
If the Greek government would hold onto the position that the finance ministers are taking, that would be very, very problematic, and I think we
could then see a quite sharp market reaction here. So, I think we must assume that this is not the finance minister speaking for the rest of the
HARLOW: We will watch and we will see as it changes moment by moment in this situation. Former Swedish finance minister Anders Borg with us on
the program tonight. Thank you, sir.
Greek markets sold of sharply after the finance minister's news conference earlier today. The Athens General Index closed down 1.5 percent
on the day. Investors fear that without an extension to the bailout, Greece will struggle to pay its bills and could ultimately be forced to
Across Europe, it was a down day for the markets. The big four European markets all fell on this last trading session of January.
The French prime minister insists Greece must stay in the eurozone and says that Athens must keep its end of the bailout bargain. Manuel Valls
spoke about Greece during a trade visit to China, where he held talks with the Chinese president. He says Greece cannot leave the single currency.
(BEGIN VIDEO CLIP)
MANUEL VALLS, PRIME MINISTER OF FRANCE (through translator): Greece will remain, must remain in the eurozone. The new Greek prime minister
said that it cannot be otherwise. We must help Greece emerge from this crisis it is experiencing. But at the same time, that's how it works in
the European Union. Greece must respect its commitments.
(END VIDEO CLIP)
HARLOW: The European Commission is still hoping that Greece is willing to negotiate and cooperate. We will see the man in charge of
deepening the ties within the eurozone is Valdis Dombrovskis. Nina Dos Santos asked him what the EU would do next.
VALDIS DOMBROVSKIS, VICE PRESIDENT, EUROPEAN COMMISSION: Greece's economy is now back to economic growth. It's the second or third-fastest
growing EU economy. Unemployment is declining, Greece's budget is in a primary surplus, so there is a financial stability ensured.
And what is very important now is actually to continue with those positive developments, with economic growth, with jobs creation, with
financial stability. And the European Commission is very much willing to work together with Greek authorities --
NINA DOS SANTOS, CNN INTERNATIONAL CORRESPONDENT: OK --
DOMBROVSKIS: -- to ensure exactly this.
DOS SANTOS: Economically speaking, if the country, as Alexis Tsipras is advocating, decides to reverse plans to privatize state assets, to raise
the minimum wage across the country, do you think that Greece will be able to accomplish those achievements you're talking about with this new
DOMBROVSKIS: Well, in any case, as I said, we are ready to work constructively with the new Greek government, but clearly, that's the basis
of the negotiations, those commitments which had been taken by Greece.
So basically, our basis of the negotiation is that all sides should stick with their commitments and certainly we would not like to see Greece
to go back into financial instability.
DOS SANTOS: But admittedly, just going back to what's been said, they're not planning on sticking with those original commitments. So, the
big question everybody has here -- and as a representative from the European Union, I'd like you to answer this -- is what happens next?
DOMBROVSKIS: Well, first of all, we are, as a European Commission, really still to engage with negotiations with the new Greek government. Of
course, one of the immediate issues is international loan program, because it's expiring at the end of February
So there is probably also some extension of the program needed to allow more time for negotiations because of course we are aware that first
announcements of the new Greek government are also not necessarily in line with the commitments which Greece had been taken.
HARLOW: The vice president of the European Commission, there, with our Nina Dos Santos.
Coming up next, the US economic growth stumbled in the last three months of the year, and the markets not impressed at all. Look at that
sell-off on Wall Street. We'll talk about that coming up next.
Also, the former chief economist at the IMF will tell me whether the US economy will pick itself back up.
HARLOW: Tonight, the new fears over the strength of the US recovery. Economic growth stumbled in the fourth quarter, according to an advanced
estimate. GDP grew at an annual rate of 2.6 percent. That is down sharply from the third quarter and far, far behind expectations.
Business investment fell and the trade gap widened even as consumers increased their spending at the fastest pace since 2006. The disappointing
growth numbers pushed US stocks lower, the sell-off accelerating at the close, the Dow Industrials ending the day down 251 points. Investors
trading in their stocks and ran for the safety of government bonds.
This ends a week of incredible volatility. After a pretty quite Monday, a series of earnings hits and misses have sent stocks on a roller
coaster ride. Speaking to me on Wednesday, activist investor Carl Icahn said he is worried that company valuations just don't reflect reality.
(BEGIN VIDEO CLIP)
CARL ICAHN, CHAIRMAN, ICAHN ENTERPRISES (via telephone): If you just saw revisions on growth next year, a lot of smart analysts that do this for
a living are saying they don't see much growth.
So, why are you paying 17 times earnings for a company that you are fighting a very strong dollar. When you're fighting a very strong dollar,
you're making a lot of money from sales abroad, that's a very big concern.
But I'll say something else about it. I don't see that the consumers are running out to buy that extra car or extra vacation, because I think a
lot of the middle class of consumers, the middle America, are concerned. They're very concerned. And therefore, that's why I'm a little concerned
(END VIDEO CLIP)
HARLOW: Carl Icahn there. Let's go now to CNN Money digital correspondent Paul La Monica. Wow, Paul, quite a sell-off. Quite a sell-
off at the close, there. I'm wondering, what are you blaming it on? GDP miss or double-edged sword of the strong dollar and all the earnings misses
and forecasts that we saw this week? What is it?
PAUL LA MONICA, CNN MONEY DIGITAL CORRESPONDENT: It really was a bizarre day, because the GDP number, that's sort of ancient history. That
came out at 8:30, and we had the stock market briefly up. It was this late-day sell-off.
I think a lot of it probably has to be attributed to the fact that it's also the end of the month. It was a terrible month for stocks. You
probably just have some people selling, closing off some positions as we head into February, so that's probably a part of it. Because the earnings
-- when we woke up this morning, Google and Amazon both --
LA MONICA: -- doing really well. So, we had some good numbers from Visa and MasterCard also. It just is very curious. But as you point out,
the GDP number is not encouraging --
LA MONICA: -- because the growth estimates that we got, much lower than expected.
HARLOW: That coupled with sort of the global outlook, the instability in Europe, the slowing down in China. It concerns people. Paul, let me
ask you this. Although you have those strong earnings that you mentioned from this morning, you do have some concerns out of really big names, a lot
of blue chips, right?
You've got a lot of these companies, like Microsoft, Procter and Gamble, Caterpillar, warning, look, this stronger US dollar is going to
LA MONICA: Without question. You can add to that list Johnson & Johnson and Hershey. You look at all the oil companies that maybe it isn't
a strong dollar play, but obviously with crude oil prices tumbling, part of that is the strong dollar. Not entirely. And they're obviously struggling
as well, cutting capital expenditures.
You're seeing just only a couple of big blue chips that are able to report results that are just so obscenely strong that they can actually
counteract the strong dollar. Apple comes to mind. It hit an all-time high today in what was a pretty rough day for stocks.
Apple's earnings earlier this week were just phenomenal, and they, like many other blue chips, get a lot of their revenue overseas. So, Apple
obviously probably would have done even better if not for the stronger dollar, but Apple is just one of those rare companies that not even the
stronger dollar is hurting them that much.
HARLOW: So, Paul, there's also concern, though, just about the broader feeling among the average American, right? Yes, you have the
economy, the numbers reflecting a stronger economy. Unemployment at 5.6 percent, we get the latest reading end of next week.
However, you still have stagnant wage growth and you still have this persistent problem of long-term unemployed. Do you think this is the
market reflecting some of these longer-term issues?
LA MONICA: I'm not so sure the market is reflecting it, because we all know that what the Fed had been doing for years with quantitative
easing, one of the knocks on that was that even though consumers weren't going to benefit from that, it clearly was benefiting the affluent who own
stocks and were buying more stocks.
I think, though, that what you are really seeing right now is this heightened sense of anxiety, not just about the US economy, but globally as
well. I think that there's probably more concern about what's going to happen in Greece, whether or not it has to leave the eurozone and whether
or not China's economy can continue to grow or if it's really going to decelerate.
I get the sense that that's more of a concern than whether or not the US might be slowing a little bit. I mean, yes, the US probably is going to
have growth that isn't as high as we thought, maybe, but it still seems, so far at least, that the US is the best of the developed market economies.
Which may not be saying much.
HARLOW: Paul La Monica, good to have you on the program. Thank you, have a great weekend.
LA MONICA: Thank you.
HARLOW: The International Monetary Fund has called the US the "single engine driving global economic growth" right now. Ken Rogoff is a
professor at Harvard and the former chief economist at the IMF. I asked him whether today's numbers should worry the rest of the world.
KEN ROGOFF, FORMER CHIEF ECONOMIST, INTERNATIONAL MONETARY FUND: It was still a solid number. And one of the biggest things that wasn't good
was that imports went up a lot. So the US is pulling the rest of the world. I think the falling oil prices is going to be very good for Europe,
Japan, and China, and we may have a little bit more even picture in 2015.
HARLOW: Yes, but the falling energy prices are really tough here for all of those energy-related jobs.
ROGOFF: They are, but it's still good for the United States. It's passing money onto middle class, poor people, people who really need it.
They're going to spend it. I think even in the United States, it's a pretty big boost to growth.
And the job front, it's true that shale was providing a lot of jobs, the oil sector. But that's evened out a lot. So I think on net, it's
still a very good thing, even for the United States.
HARLOW: So, in Davos at the World Economic Forum about a week ago, you said there is still a residual nervousness after the financial crisis.
A nervousness and fear that is sort of taking control somewhat -- somewhat -- of the US economy in this recovery. How severe is it, and how do you
think we reverse it?
ROGOFF: Well, I think there is a residual nervousness. It's small, but it's one of the reasons why global interest rates are so low. Because
of course, the stock market is really high. I think it's one of the reasons for the disconnect.
People sort of want that insurance, not just people, but governments, sovereign wealth funds are looking for that insurance. That is one of the
reasons we have such low interest rates.
ROGOFF: I don't necessarily think it means that everyone things growth is going to be very low. Because of course the stock market's
telling a different story.
HARLOW: So, US bond yields, though, falling even further today. I wonder if you think there is a pervasive climate of fear in the global
economy right now despite a lot of strong numbers.
ROGOFF: Yes. It's also true that people have just decided that there's never going to be inflation again.
ROGOFF: It's really striking since the summer that not just near-term inflation has been low, but measures we have of longer-term inflation,
expectations have been just dropping. And even in many places they're below targets way into the future.
I think people are going to be surprised. Central banks eventually will figure this out and inflate, but that's one of the things going on.
Certainly, the GDP numbers were a little disappointing and interest rates fell a little bit, but I wouldn't read too much into it.
HARLOW: So, let me as you this. Hedge fund manager Anthony Scaramucci saying in Davos that deflation -- deflation is one of his huge
concerns. He actually called it "annihilation," if we see it. He says, "It is Darth Vader --"
HARLOW: "-- the Death Star outside of the atmosphere of the Earth, shooting lasers to blow up the world's economy." Your response? Is that
ROGOFF: It's colorful. Look, when we get deflation because oil prices have fallen, that's a good thing for most of the world. When we get
deflation because people are dispirited and unemployment is high, that's a bad thing. I don't think we're in that kind of deflation here. I think
that growth is picking up, jobs are picking up.
The Federal Reserve would like inflation to be higher, but it's not all that low in the United States, if you take away the temporary effects
of oil. So, yes, it's very dramatic. I don't think we're going to have deflation in a technical sense in the United States. Europe is a different
matter, but they're trying their best.
HARLOW: Former IMF chief economist Ken Rogoff there for us.
He finds the groove and he makes his move. Music mogul and businessman Jay-Z makes a big bid on a Scandinavian startup to the tune of
HARLOW: Facebook is launching its own separate site for this weekend's Super Bowl. It wants NFL fans to share pictures and video of
their game day experience in the hope that they will use this site as sort of a second screen while they take in Sunday's big game.
In the future, sharing photos might be something that happens in three dimensions. The technology is already here, as Richard reports in Tomorrow
RICHARD QUEST, CNN INTERNATIONAL (voice-over): Photographs. They capture that moment in time, and we all cherish them. The heady days when
we'd share these moments with family and friends, show them a photo album or have a slide show of our favorite holiday pics.
QUEST (on camera): When the digital camera got rid of film, e-mailing photos became the way we shared memories, and we thought it couldn't get
any easier. Then came the smartphone with the camera built in.
With the smartphone came the explosion of social media sites like Facebook, Twitter, and Instagram. They allowed us to share our photos with
the world faster than you can say "cheese." The future could look like this: sharing a different kind of photo, one that's 3D.
JAVID KHAN, CEO, HOLOXICA, LTD: Every sci-fi fan knows that the best way to do 3D is using holographic technology, so that's where I started.
Holographic technology works on the principle of defraction.
Defraction happens when light comes long and bounces off structures that are about the same size as the light. And if you can design these
structures very carefully, then you can persuade the light to do fantastic things, like form images in free space.
QUEST: Holoxica is developing technology that could take our snaps of skylines, statues, and even spacemen into the third dimension. For Khan,
this is the natural progression for the photo.
KHAN: I believe that the future of the photo lies in three dimensions rather than two just because the world we live in is in three dimensions,
and three-dimensional images have far greater impact on our visual system because it's highly-tuned towards 3D. And so, it's just a natural way of
things to be.
I can imagine walking into your home in 10, 15 years' time and seeing floating holographic images coming off the walls and video images coming
out of a holographic video display.
QUEST: Of course, this is just one picture of what the future of photos and sharing might look like. The MisTable has been developed by a
group at the University of Bristol in the United Kingdom. It allows images to hover while you manipulate them and send them to friends.
Soon, our car windows will become our camera and photo album, with companies like Toyota exploring interactive screens for use while you're on
the move. Our love of taking a snap, a photo, a memory, that will never change. It's the way we share them that certainly will.
HARLOW: Richard, thank you for that.
Next, Jay-Z wants to redefine the way that you and I consumer music.
(BEGIN VIDEO CLIP)
(MUSIC - "ROC BOYS" BY JAY-Z)
(END VIDEO CLIP)
HARLOW: One of the most famous artists of all time, he is looking to expand his business empire to include music streaming. In a deal announced
Friday -- a bid announced Friday, rather -- he is buying -- trying to buy a Swedish startup called Aspiro for $56 million.
This is a company that owns music subscription service WIMP or W-I-M-P and Title, as it is called here in the United States. They have major
deals with huge recording companies.
Jose Pagliery of CNN Money joins us now with this. I have to ask you, did I say it right? Is it WIMP or W-I-M-P? I'm not exactly --
JOSE PAGLIERY, CNN MONEY CORRESPONDENT: It's WIMP. It's WIMP.
HARLOW: WIMP, OK. I wasn't exactly sure. But -- so this is a $56 million bid. I'm told by Jay-Z's team he put the bid in, it's not a done
deal yet, they have to wait for shareholder approval. But assuming this gets through, what makes this music streaming service different than, say,
PAGLIERY: So, what makes this different is that it claims to have hi- fi, high fidelity audio. So, it's almost like you can just think of streaming, just better quality streaming. So, it's better than what you'll
hear on YouTube, it's better than what you'd hear streaming Spotify or anything else. At least that's the claim.
HARLOW: But is that what -- Spotify sounds fine to me. Can people really hear the difference? Is the technology that much better?
PAGLIERY: That's a great question. So, I just tried it out a few minutes ago, and it's a heck of a lot better than streaming something on,
PAGLIERY: But I don't hear much of a difference between that and playing maybe my iPod, right? Or streaming something from my phone.
PAGLIERY: So, the audio's great. I don't know if it's really better than the other competitors. I can't really tell. But it might just be me.
HARLOW: I think it's interesting we're seeing Jay-Z really expanding here, right? So, he started his own sort of sports repping agency. He
obviously has his entire business empire. Now, he's going into this side of music.
HARLOW: We saw Beats sold to Apple for an astonishing $3 billion, largely for the streaming aspect of it. This is the future of music
distribution, so is this a smart move on your take?
PAGLIERY: It -- OK, so it's smart. But lets consider how crowded it is out there, right?
PAGLIERY: So, we've got Songza owned by Google, which is good if you're -- if you're in the mood for music, you think that you're sad or
there's a rainy day outside, that's what Songza is good for. And then you've got Pandora, which learns from you. You teach it what kind of music
you like. Then you've got Spotify, which streams on demand.
And so, it's -- there are a lot of services out there. So, we're suddenly seeing a really competitive marketplace. I think of it as just
yet again, we've got another company that offers streaming in another way, so it's really busy out there. They're really going to have to stand out
HARLOW: And I wonder, obviously when you're competing against the likes of Apple, that's a big name. But hey, if you've got Jay-Z's name on
there, that's a big name, too.
PAGLIERY: It is. It is. But there are ways to differentiate themselves. One is the better quality sound. But another is -- and I'm
not suggesting that this will do it -- is actually pay musicians a better wage.
PAGLIERY: So, one of the big criticisms for all these music streaming services is that they don't actually pay musicians a whole lot.
PAGLIERY: I've seen numbers that say you have to stream upwards of a million songs a month in order to get minimum wage here in the US.
PAGLIERY: And so, that's another side.
HARLOW: That's really interesting, because we saw that as one of the reasons why Taylor Swift pulled her music from Spotify. Jay-Z being an
artist himself, will he do it differently?
PAGLIERY: That's a great question.
HARLOW: Yes, we'll be watching and see if he does. Made the bid, we're waiting for final shareholder approval on it. Jose, thanks for
joining me. Appreciate it.
PAGLIERY: My pleasure. Thanks.
HARLOW: Coming up, Russian rates a recession and the ruble. The White House says Moscow's surprise rate cut may be a sign of chaos at the
Kremlin. A report from Moscow, and also more from Ken Rogoff coming up.
HARLOW: Welcome back, I'm Poppy Harlow in New York. For the next half hour the CEO of Western Union tells us that immigration in Europe can
only help its biggest companies. Also, why Argentina's troubled economy may have something to do with the mysterious death of the prosecutor
Alberto Nisman. Before that though, this is CNN and these are the top headlines we're following this hour.
Russian separatists in Ukraine say 12 people have been killed after shelling hit the city center of Donetsk. CNN teams in the area saw several
bodies after blasts hit the region but cannot confirm the total death toll. It is not clear who is responsible for the shelling which has moved much
closer to the city in recent days.
ISIS has attacked the Northern Iraqi city of Kirkuk triggering heavy clashes with Kurdish forces. A senior Kurdish commander and five of his
fighters are among the dead. Kurdish forces were held and attacked in the city center but ISIS militants reportedly gained ground in districts to the
The most notorious assassin of South Africa's apartheid has been granted parole after serving 20 years behind bars. Eugene de Kock led a
police death squad which kidnapped, tortured and killed black activists. Since then, authorities say he has shown remorse and say he is being
released in part to promote reconciliation.
The planned flogging of a Saudi man has been postponed for the third week in a row according to the man's sister. Raif Badawi who operated a
liberal website was sentenced to 1,000 lashes and ten years in prison for insulting Islam. He received 50 of those lashes every Friday for five
months. Two previous delays were attributed to his wounds not healing from the first round of punishment.
In the United States, Mitt Romney announcing he will not be running for president in 2016. He lost to President Obama in 2012 and Romney had
been gearing up for a potential additional run at the White House. However, on Friday morning in a call with supporters, he said believes
other members of the Republican party deserve a chance to become the party's nominee.
Russia's central bank has slashed interest rates as it tries to slow the pace of economic decline. The White House says the surprise move
illustrates an element of chaos in the Russian economy. The key interest rate now stands at 15 percent, lowered from 17 percent. The ruble fell
again in response to that move. Only few weeks ago the central bank was cranking rates higher in an emergency bid to prop up the ruble. So a big
change in policy here. The currency has halved in value against the U.S. dollar in the past six months. Today though the bank says looming economic
worries mean rates have to go down, not up. Before this, the central bank had hiked interest rates six times in the space of a year as the currency
crisis unfolded. This week's Standard & Poor's cut in rating on Russia's bonds to junk status, a move that makes it more expensive for Russia to
The E.U. agreed on Thursday to add new names to a sanctions blacklist over Russia's involvement in Ukraine. From a rate surprise to gloomy
warning, Russia's central bank says the economy will shrink 3.2 percent in just the first half of this year alone. Our senior international
correspondent Matthew Chance takes a look at the new search for stability there.
MATTHEW CHANCE, CNN SENIOR INTERNATIONAL CORRESPONDENT: Well it was indeed a surprise decision by the Russian central bank - lopping 2 percent
of its key interest rates - it was only last month that it raised interest rates by 6 and 1/2 percent to stave off inflation and to bolster the
flagging currency, the ruble. The bank now appears to have reversed course due to what it calls the shift in the balance of risk - the threat of
inflation was now outweighed by a cooling economy. With the interest rate cut from 17 percent to a still very painful 15 percent is unlikely to do
much to spur economic growth. Russia's economy is expected to contract by at least 3 percent this year according to the International Monetary Fund.
Hit by a cocktail of low oil prices and international sanctions over its role in Ukraine. It does underline however just how unpredictable Russia
has become. And that can't be good for investors looking for stability. Back to you.
HARLOW: Matthew Chance reporting for us from Moscow. Thank you for that. I have been talking to former IMF chief economist Ken Rogoff about
this issue. He's a Harvard professor and he had plenty to say about Russia, warning that the country is in big trouble if oil prices keep
falling. I also asked him if he shares the view with the White House that there is chaos at the Russian central bank.
KEN ROGOFF, FORMER CHIEF ECONOMIST, IMF: It's a little hard to understand what they're thinking was because 17 percent - that's where they
had the rate - it sounds really high to everybody. We're practically at zero. But their inflation rate's not at zero. Their inflation rate was
already double digits last year. That was before the ruble crashed which is going to pass through to Russian prices. You know, it will easily get
inflation of 15 percent, maybe 20 percent. So in that context, their interest rate wasn't so high and to lower it just when Standard & Poor's
has marked down their debt to junk status -
ROGOFF: Just when the ruble's, you know, going to ridiculous highs, it is a little hard to understand their thinking. I think there was some
political pressure there.
HARLOW: Yes, of course politics is a part of this but some analysts are saying, now look this is early going, this just got announced today.
But some are saying this rate cut could do more harm than good in the long term. Are you in that camp? Would you have made this move?
ROGOFF: You know, listen, they're in big trouble in Russia. If the oil prices stay low even though they've been conservative in a lot of
things they've done in their macro policy, this is an economy that has not diversified problems with the rule of law, state institutions, etc. So the
ruble's falling in and in other economies that would mean, well, OK, oil's down but we'll export other stuff. But in Russia, that's not happening
quickly. So they're in a lot of trouble. If oil prices don't go up -
ROGOFF: -- in the next year or so at least to $70, maybe higher, they're going to have a full-blown financial crisis. So we have to look at
this is as a tactical move in a difficult situation. It's a little hard to understand what they were doing, but it's not a decisive change one way or
the other. Russia is in trouble.
HARLOW: Looking at U.S. and European sanctions against Russia, you wrote an interesting article this month about sanctions and said, look,
they're really disappointing almost always in their lack of impact, but they're imposed by governments so often to appear to domestic audiences to
be doing something. So why keep doing them?
ROGOFF: Well, we want to do something and we certainly don't want to go to war. I describe the sanctions as a lucky punch because the oil price
collapse would have cut Russia to its knees even if we didn't do any sanctions. But putting the sanctions on top of that, it does hurt because
they need - they're going to need - help. They're going to need to export to the rest of the world. If they keep sinking, they may need financial
help. So, you know, certainly the sanctions are biting but I think if the oil price hadn't dropped, we'd be looking at a whole different picture.
ROGOFF: I think the big thing going on is the oil price dropping, and if it doesn't rise, Russia's going to have a hard time even if the
sanctions are lifted.
HARLOW: Ken Rogoff with his outlook for Russia there. Meantime, the CEO of Western Union has a warning for those in Europe who would vilify
immigrants. He thinks politicians use the issue of immigration as a way to deflect from structural economic problems. He spoke with Richard at the
World Economic Forum in Davos.
HIKMET ERSEK, CEO, WESTERN UNION: Our customers are migrants - most of the customers - and I feel I have the voice of the customers. I was a
customer and I sent money to my father many, many years, and every time I sent money to my father, -- I actually have a thing about his birthday or
what his needs. And it was love, right, sending love. And I feel like our customers and my background helped a lot, so I understand the voice of the
customers, which they suffer a lot actually. I mean, they move from one country to another country, they don't get accepted there.
RICHARD QUEST, CNN INTERNATIONAL ANCHOR AND REPORTER HOST OF "QUEST MEANS BUSINESS" SHOW: But immigration is such an issue at the moment in
Europe, isn't it?
ERSEK: Well, I don't see it as an issue. Immigration was always there. The issues of immigration was always there. But today it's an
issue because it's kind of put (ph) by the politician as a - that migrants taking jobs away, migrants are not good. But it's the opposite actually --
migrants create jobs. You know that about 40 percent of the Fortune 500 companies were created by a migrant or their children.
QUEST: Do you think there's a difference in the way Europe used migrants -
ERSEK: I think so.
QUEST: -- from the United States?
ERSEK: Yes, well Europe has more traditional. United States, I give you an example - as I came over to Europe everybody said that, `Where are
you from?' As I moved on over to U.S., everybody said - no, nobody asked me that - what did you do to get that job? So, there is a difference - a
different approach in Europe, how the Europeans do see the migrants. However, it's changing also. There are also good examples like in Austria
where I was, they created an integration office in Austria for migrants.
QUEST: But do you fear a backlash against (inaudible)?
ERSEK: Well, it is, it is. Unfortunately it's misused by many popular slogans against, you know, -- you blame migrants although the
issues are structural issues. They're economical issues but you need someone who sees whose fault is that?
HARLOW: Richard Quest with the CEO of Western Union there in Davos. Coming up next, the mystery surrounding the death of an Argentine
prosecutor is giving rise to questions about the country's economy, its leaders and their ties to Iran. We'll have the latest from Buenos Aires.
HARLOW: Welcome back to the program. Argentine special prosecutor Alberto Nisman has been laid to rest. The questions surrounding his death
though remain unanswered. He was mysteriously killed shortly before he was due to make serious allegations against top officials. The investigation
into his death is shining a light on Argentina's economy, the country's leaders and their potential connections to Iran. Shasta Darlington has our
SHASTA DARLINGTON, CNN INTERNATIONAL CORRESPONDENT BASED IN SAO PAULO, BRAZIL: The curl of a leg, a passionate embrace, a melancholy tango danced
in the streets of Buenos Aires for passing tourists. The mysterious death of special prosecutor Alberto Nisman is being followed with a similar
tragic passion. Did he take his own life or was he killed? Just hours before he was going to present evidence President Cristina Fernandez de
Kirchner was allegedly covering up Iran's role in the bombing of a Jewish center that killed 85 people. We sit down with consultant Emily Hersh to
see if any of this could be related to Argentina's economy.
EMILY HERSH, DCDB CONSULTANCY: The timing of this cover up or alleged cover up, did happen at a time when access to foreign oil became a crucial
- or critical - component of the Kirchner administration.
DARLINGTON: According to Nisman's report, the alleged cover up began sometime after 2007 when investigators linked Iranian nationals to the
bombing. That's when Nisman says Buenos Aires and Tehran secretly negotiated a deal that would give Argentina access to oil if the
accusations against the Iranian suspects went away. Argentina imports oil which it then subsidizes at the pump. But it's locked out of international
capital markets after a debt default.
HERSH: The situation in the country is not dire, however it's precarious and access to energy is the cornerstone of how this government
stays in power.
DARLINGTON: The cash crisis can be felt on the streets of Buenos Aires where the government has severely limited access to dollars. At the
hotels you get the official exchange rates - 8.7 pesos to the dollar. Gracious.
Male: De nada.
DARLINGTON: Now we're going to go across town and talk to somebody who exchanges money on the black market. A man we'll call Juan offers a
much better deal. "Today it's at 13.5 pesos to the dollar," he says. "At the bank you'd have to declare how you got the money and even then they
can't necessarily sell it to you." A constant frustration for Argentines, but cause for a government cover up? According to Nisman's report, the
deal with Iran never reached fruition because the Interpol arrest warrants for the Iranian suspects couldn't be revoked.
Bilateral trade did spike during the years the alleged negotiation took place but crude oil was never part of the equation. An economic
scenario full of dramatic twists and turns. Shasta Darlington, CNN Buenos Aires.
HARLOW: Shasta, thank you for that report. Meantime, it is yet another big hit for big oil. Chevron, the second largest U.S. oil company,
says it will slash its spending by 13 percent this year -- that is large. As the major oil companies report their earnings, the damage from the fall
in oil prices is becoming very clear. Chevron joins a host of other oil companies that are scaling back - even companies that can extract oil
cheaply are suffering. Richard Quest spoke to Pemex CEO Emilio Lozoya Austin and asked him what the company was prepared to cut.
EMILIO LOZOYA AUSTIN, CEO, PEMEX: Pemex also faces a difficult situation, meaning 60 percent decline in our price obviously hits our
earnings. But Pemex is in a good position at the same time. Pemex has a $23-dollar-per-barrel average cost of production, so even at these levels,
we're making money. However, clearly I need to cut costs. But I will try not to touch the investment side of it.
QUEST: But hang on a second. You were at 105/150 - you were making $70/$75 a barrel roughly. Now you're making a fraction of that. Who's
going to bear the cost? Your shareholders?
AUSTIN: Well I only have one shareholder -
AUSTIN: -- which is the state.
QUEST: The government. So the government bears the cost of what's happening.
AUSTIN: Well, it is important to mention, Richard, that in 2015 the government made a very prudent fiscal decision which was to hedge all of
the - all of the proceeds from the oil for 2015 at $79 per barrel. So the spending of the government in 2015 is untouched. In 2016, that will be
QUEST: You are facing a completely new environment coming up shortly, aren't you?
QUEST: As you have to do battle - I mean, you had to - you had the playground to yourself.
QUEST: And now others can bid for blocks.
AUSTIN: You probably will not believe this, but Pemex is extremely excited about competition -
QUEST: Oh, yes of course.
QUEST: I'm not surprised you're saying that -
AUSTIN: And let me tell you why. Because for the first time since 75 years, we will be able to do joint ventures and partner with technology
partners, capital partners and people who can help us develop some geologism (ph) - geological opportunities that on our own we were not doing
a good job.
QUEST: Are you hearing any rumors and gossip from north of the border that the industry - the non-traditional, the fracking industry - some of
these operators are in trouble?
AUSTIN: Indeed and but you just need to look at the bond markets that have financed this operations. They're highly leveraged and some of the
inefficient ones in the non-conventional or the frackers, they will have to leave the market. Others that are even profitable at this levels would
stay. But like any market, it will balance out.
And what I can tell you - and this is a very important figure - the International Energy Agency has a demand prognosis for 2030 - between 2030
to 2040 - a 120 million barrels per day. For that demand to be met, you need large, large scale material projects, fields where a lot of liquids
are found. In order to go there, you need to go to the frontier markets - those markets that were being developed in deep waters. So eventually the
market will balance out. The price today is not - does not - reflect the fundamentals. When the emerging markets come in like China and India, more
cars come and need to be, you know, developed in more urban societies. That demand needs to be supplied, and for that you need a price somewhere
else. Currently in my opinion the price does not reflect the fundamentals.
HARLOW: An optimistic outlook on the price of crude from the CEO of Pemex there with our Richard Quest. Next, the media frenzy, heckling and
the boss's daughter in big trouble. It was a big day at the so-called "nut rage" trial where Korean Air's chief was called to testify. We'll bring
you the latest from Seoul just ahead.
HARLOW: Qatar Airways has acquired a large stake in International Airlines Group. It has bought just under 10 percent of IAG which the
parent company of British Airways and Iberia. The deal gives Qatar Airways more muscle as it competes with other carriers in the region like Emirates
and Etihad. Richard explains.
QUEST: The 9.99 percent stake is a strategic investment for Qatar Airways and makes them the largest single investor in IAG which owns BA,
Iberia and Vueling. The two chief executives - Willie Walsh at IAG and Akbar Al Baker get on extremely well. Willie Walsh, IAG, were the sponsors
for Qatar joining the One World Alliance, and it's hoped from Qatar Airways' point of view that in the future they'll work much more closely
For IAG, it's been an extremely busy couple of months, having made several offers for the Irish airline Aer Lingus which were rejected. The
latest offer has been has been accepted subject to the approval of the Irish government and Ryanair. Overall, IAG, Qatar Airways and maybe Aer
Lingus in the future, will all be working much more closely together. Richard Quest, CNN Seoul, South Korea.
HARLOW: The CEO of Korean Air has been on the stand in the trial of his daughter over the so-called "nut rage" incident. Cho Yang-Ho has vowed
to reform the corporate culture at the airline. His daughter Heather Cho is accused of endangering aviation safety and being part of a big cover up,
all over a serving of macadamia nuts. Paula Hancocks reports from Seoul.
PAULA HANCOCKS, INTERNATIONAL CORRESPONDENT FOR CNN INTERNATIONAL, BASED IN SEOUL, SOUTH KOREA: Korean Airs chief receives a huge media
welcome. In court to testify in the so-called "nut rage" trial of his daughter and former vice president. Heather Cho is on trial after ordering
a plane back to the gate so she could the kick the chief steward off. His first class crime - the macadamia nuts were served in the bag and not on a
Cho has pleaded not guilty to charges of obstructing aviation security, a charge that carries a maximum prison sentence of ten years.
CEO Cho Yang-Ho told the court he'd scolded his daughter over her behavior and promised there would be no repercussions for the chief steward. The
female flight attendant who actually served the nuts told the court that when Cho got angry, she pushed her and she shouted at her, telling her she
should get off the plane. She also says that when she got back to Seoul, a Korean Air manager told her she should not mention any verbal or physical
abuse in her official statements.
Prosecutors tell CNN they're keen to determine if there was an attempt at a cover up as the flight attendant and other crew members allege. The
chief executive did not address the allegation in his testimony.
HANCOCKS: The South Korean public is less than impressed. This case has added to growing resentment over the power of the country's big family-
owned companies or chaebols. Court convenes again Monday. Prosecutors have asked the chief steward to then tell his side of the story. Paula
Hancocks, CNN Seoul.
HARLOW: We'll be right back after this break with a recap of a miserable day for global markets.
(NEW YORK STOCK EXCHANGE BELL RINGING/ CHEERING)
HARLOW: Right from the opening bell, Wall Street had an appetite for shares of Shake Shack. Its stock surged 135 percent this morning in its
debut on the New York Stock Exchange. The final closing price, $45.90 a share. That is more than double the initial public offering price at $21 a
share on Thursday evening. This upscale cult burger chain raised $105 million from the stock sale, so it can afford to be generous as it courts
new fans. Shake Shack gave away free burgers outside the NYSE to celebrate its debut on Wall Street. To say it was popular - that is a bit of an
understatement as you can see. Quite a long line there for just a free burger.
The broader U.S. stock market closed out a very volatile week with another steep loss. The Dow Industrials ended the session down more than
250 points. Investors piled into bonds after a disappointing reading on U.S. economic growth.
GDP grew at a rate of 2.6 percent in the fourth quarter - that is far behind expectations. And that is "Quest Means Business" for this Friday.
I'm Poppy Harlow. Thank you so much for joining me. Have a great weekend.