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EU Job Crisis Worsens; Prioritizing Youth Unemployment; European Market Reaction; Merkel Meets Samaras; Dow Down; US Immigration Dismantles

Tue, 01/08/2013 - 9:13pm
Nina Dos Santos, Dan Simon, Richard QuestAssociated Press

xfdci QUEST-MEANS-BUSINESS-01

Market Reaction; Merkel Meets Samaras; Dow Down; US Immigration Dismantles

Major Piracy Ring; Samsung Has Record Quarter; Consumer Electronics Show;

US Dollar Makes Headway; Dreamliner Nightmares; Ireland's Employment

Outlook - Part 1>

the eurozone now at an all-time record, up to 11.8 percent for the month of

November, and the jobless rate for the EU as a whole up as well, to 10.7

percent. German chancellor Angela Merkel met with Greek prime minister

Antonis Samaras in Berlin, who said that Greece was making a "great effort"

to get its economy back on track. A Chinese man has pleaded guilty to

operating a website which distributed more than $100 million worth of

pirated software around the world in one of the most significant cases of

copyright infringement ever to have been uncovered by the US Immigration

and Customs Enforcement. A look at some of the latest new releases and

innovations at the Consumer Electronics Show in Las Vegas, where hybrid

products seem to be the rage in 2013. Two Boeing 787 Dreamliners have been

grounded in just the last two days, a Japan Airlines flight due to leave

Boston just a couple of hours ago that was canceled after a fuel leak was

discovered, and a Japan Airlines 787 that actually caught fire just shortly

after landing Monday, again at Boston Airport.>

Economy; Electronics; Employment and Unemployment; Europe; Fires;

Government; Internet; Media; Meetings; Products; Stock Markets; Technology;

Telecommunications; World Affairs; Youth>

NINA DOS SANTOS, HOST: Prioritize the young. The EU's jobs commissioner tells me his plan to fight record eurozone unemployment.

Doubts about the Dreamliner. A second fault in a mere two days.

And marketing through mystique. David Bowie makes a sudden entrance back into the music industry.

Hello, I'm Nina Dos Santos in for Richard Quest, and this is QUEST MEANS BUSINESS.

Good evening. Europe's job crisis has reached another new low. Unemployment in the eurozone is now at an all-time record, up to 11.8 percent for the month of November. Well, the jobless rate for the EU as a whole is also up as well, this time to 7 percent -- 10.7 percent, so it's still in the double-digits.

Now, it's been almost two years since we saw in that monthly rate for this region, and now almost a quarter of young people across the euro area are out of work. The disparity between Northern and Southern Europe is also painfully obvious if we delve deeper into these figures.

Let's do that with the aid of our magic wall here. So, as you can see, what we've got is the map of Europe behind me, and the two worst- affected countries, as you'd expect, are both in Southern Europe, in particular, not just Greece, but also Spain, a huge economy here.

Now, Spain actually has the highest jobless rate in the European Union. Overall, it stands at 26.6 percent. It went up yet again in the latest reading that was released today. But it's its youth unemployment rate that is just as staggering. That one is up to 56.5 percent and continues to rise as well.

By contrast, what we're seeing is some pretty low rates in some of the Northern European countries. They've, in fact, got some of the best track records. Take, for instance, Germany, but also Austria and Luxemburg on either side of its borders.

Homing in on Germany, which is, of course, Europe's biggest and most robust economy, its unemployment rate is a fraction of that of Spain. Take a look at this figure: 5.4 percent versus, as I was saying before, 26.6 percent for Spain.

Germany's youth unemployment rate is also the best in Europe, well below the EU average, but it is still around about 23.7 percent, which is steep for even Germany as well.

Europe's employment commissioner, Laszlo Andor, says that countries like Spain need to take lessons that have managed to keep their unemployment rate down like, for instance, Germany. And he also says that if they can do that, the people in the south can start looking for jobs in other countries if there's no work at home.

(BEGIN VIDEOTAPE)

LASZLO ANDOR, EUROPEAN COMMISSIONER FOR EMPLOYMENT: Spain and other countries should take over good models from other countries, like the youth guarantees, which have been developed in Austria.

And we just adopted a youth employment package in December in the European Commission, which recommends the member states to adopt a youth guarantee, which would help the young generation, because the youth have been very badly hit by this recession. In the last five years, the youth unemployment became excessively high, especially in countries like Greece and Spain, and --

(CROSSTALK)

DOS SANTOS: Yes, let's quantify it, then --

ANDOR: -- a youth guarantee --

DOS SANTOS: Let's -- sorry. Let's quantify that excessively high figure.

ANDOR: Yes.

DOS SANTOS: To put it into context, we're talking about over 57 percent for some of these countries. This could be a social disaster, though.

ANDOR: Yes. In Greece and Spain, the situation is very bad. Youth unemployment is more than 50 percent. But overall in the EU, it's 23, and that's also pretty high.

So, we have to prioritize action against youth unemployment. We have to ensure that the Europeans put together funds serving this purpose more efficiently and faster.

And that's why in the last year, we reallocated about 10 billion euros in order to find projects that support the young people quicker and more efficiently.

DOS SANTOS: Let me ask you this: the painful irony of these jobs figures that were released for the EU today is that they also coincide with economic sentiment which shows that companies, at least, are getting a little bit more confident across the region.

Why do they not yet have the confidence to hire if people like your boss, Jose Manuel Barroso, is saying that the eurozone crisis is effectively almost over?

ANDOR: Well, even if there would be a recovery forthcoming, it's still very important to work on employment policy in the labor market.

Member states where there has been a start with balanced labor market reforms like, for example, Italy, have to stick to these reforms and continue implementing, because they create a more dynamic labor market and help better access, especially for the young people, but also other disadvantaged groups to quality jobs. This is very important.

And also to invest in skills and ensure that there are better models to help people coming from school or training to the labor market and the so-called dual-training system, which functions well in Germany and some other European countries. It's also a model which Italy and Spain and others should follow. So, there are many possible solutions.

Plus, on the top of that, we can ensure that there is better mobility, greater transparency of the European labor market, and those in the south or other regions where there is a recession continuing probably this year, have a better understanding of the job opportunities in other countries, and they can find it more easily than in the past.

(END VIDEOTAPE)

DOS SANTOS: That's Laszlo Andor, there, the commissioner for jobs across the European Union.

Well, the European stock markets had something of a mediocre session, as you'd imagine, given the fact that these economic numbers were not much to shot about. As you can see, the London FTSE 100, ending the day on a downbeat note.

The Xetra DAX in Frankfort being particularly affected by a fall in German exports, a surprise fall in both exports and imports, showing that Europe's most robust economy may be starting to show signs of being affected by the eurozone crisis. We saw the other two markets up, though.

Much of the focus in the United States has been, of course, on the earnings season. Investors are concerned about the prospects for the start of this earning season as a number of companies start to release their figures.

We've seen a jump in European economic sentiment giving the markets some sort of support, but in the meantime, the German chancellor, Angela Merkel, did manage to meet with the Greek prime minister in Berlin. Antonis Samaras said that Greece was making, quote, "great effort" to get its economy back on track.

And going back to the topic of those US markets and those US corporates, we're expecting Alcoa, the American aluminum producer, to kick off the earnings season after the bell, which is traditional.

A lot of people just waiting with a lot of anticipation on the Dow Jones Industrial Average to see whether Alcoa, like many companies that have reported before, will lower its guidance because about 73 percent of companies that reported their quarterly earnings statements in November showed some sort of lowering of their guidance going forward, given the uncertain outlook.

As you can see, we've got the likes of the Dow down by about 60 points at the moment, nearly half of one percent.

Up next, it's gadget mashup. The latest products redefining what it means to be a phone and a tablet and even a TV. We're going to be at the consumer electronic show in Las Vegas with all the latest gadgets.

(COMMERCIAL BREAK)

DOS SANTOS: A Chinese man has pleaded guilty to operating a website which distributed more than $100 million worth of pirated software right around the world. It's one of the most significant cases of copyright infringement ever to have been uncovered.

I'm joined now from Washington by John Morton, who's the director of the US Immigrations and Customs Enforcement, which cracked the case. This is otherwise known as the ICE, and it's the investigative arm of the Homeland Security for the United States. Great to have you on QUEST MEANS BUSINESS, John.

First of all, this is an extremely complicated case, and it also involves cross-border issues and huge amounts of money at stake here. Just run us through the complexities of dealing with all that.

JOHN MORTON, DIRECTOR, US IMMIGRATION AND CUSTOMS ENFORCEMENT: You're right, Nina. This was an international case, it literally spanned the globe. It involved the organized counterfeiting and piracy of software from major software programmers and manufacturers from around the world, the United States, Western Europe, and Japan.

And it essentially was a ring of organized criminals who were taking the software, cracking the licensing codes, and then making them available to anybody over the internet for sale.

DOS SANTOS: So, presumably for departments like yours, this is a sort of watershed moment, isn't it, in the -- in a market, a pirating market, which is worth literally billions. What does it mean, also, for the people who are buying from those individuals codes and pirated software that they knew was pirated and cracked?

MORTON: Very significant problem. Listen, we're not talking about a 13-year-old downloading a video illegally off the internet. We are talking about industrial computer software that's very sophisticated that's used in the defense industry, that's used in engineering and water management.

These are not the kinds of things that you want to be sold willy-nilly over the internet. And we're not talking about $50,000 here, $100,000 there. This was a problem measured in $100 million. So, we've got to fight this kind of piracy relentlessly. This is all about organized crime.

And by the way, when you go and you buy something like this over the internet, you're not only buying something that is unlawful, you're running the real risk of getting malware in the download, people taking your credit card and using them for nefarious purposes. No good comes of this, either for the companies involved or the people who buy it.

DOS SANTOS: If we take a look at exactly how you crack this case, between January 2010 and 2011 in June, you made a series of purchases, you had agents make a series of purchases. Honestly, this affects American companies.

But it does hinge on the cooperation of authorities elsewhere where these websites are being set up and are selling this kind of pirated software. How difficult is that? How much cooperation did you get from places like China to track down these individuals?

MORTON: It's very difficult to investigate these cases. They occur in large part in countries outside of the United States, so we have to engage in fairly sophisticated undercover techniques, and we have to do it over many years.

This case took us literally three years to investigate and we had to lure the lead defendant out of China to Saipan, where he was arrested and brought to the United States. So, a lot goes into this. It's not easy.

It's, frankly, a sophisticated international game of cat and mouse where we have to employ very, very sophisticated methods to track people over the internet and ultimately get them to the United States where we can arrest them and prosecute them.

DOS SANTOS: Fascinating stuff, John Morton, there, the director of the US Immigration and Customs Enforcement Agency. Thank you so much for joining us here on QUEST MEANS BUSINESS.

Samsung has had a record quarter. In its earnings guidance that it published today, it says that it probably made around about $8.3 billion in the last three months of the year, and that would represent an increase -- get this -- of a staggering 90 percent. It would also be the company's fifth consecutive record quarter of record figures.

Now, this is what analysts think is fueling all of this surge. Yes, you guessed it. It's Samsung's Galaxy SmartPhones that are likely to have been accountable for around about two thirds of its sales in the third quarter of the year, with global sales actually beating those of its nearest rival, the Apple iPhone.

Now, despite the record profits, Samsung Electronics still saw its shares falling by around about one and one third of one percent in Seoul this Monday.

Samsung has actually been one of the star attractions at the Consumer Electronics Show in Las Vegas. At this year's event, we've been seeing all sorts of products that combine a number of features of two gadgets, such as, for instance, something like this, I have in my hand.

Let me just show you exactly what the latest nomenclature tells us. First of all, if you put a phone and a tablet together, like for instance in this equation, you get something like this. It's called the Phablet. I have one in my hand, this is a Samsung one, this one is a Huawei one.

And the screen on the new Huawei that they're going to be releasing at the CES is only fractionally smaller than a tablet and nearly twice as big as the first iPhone, which of course revolutionized the world of touch phone technology.

Now, here's another interesting one. By combining a networked computer and a television set, what you get is one of these, it's a smart TV. This is actually the ultra-high-definition one that's being unveiled from Samsung. It even lets you upgrade the smart bit of the technology here to keep the television up-to-date with the latest software for years to come.

And next, let me just show you this. If you add the tablet features to a laptop, what you've got yourself is -- I like to call this one a tabtop, but instead, apparently, it's called a hybrid.

And at this year's CES, Intel actually announced this latest gadget. It also announced that all new laptop will be using its ultrabook specification, and they will have to have a new touch screen. So they'll have to -- you have to be able to touch this bit and flip the other bit around to make it like a tablet, as you can see.

We'll see more designs that will come like this, I'm sure, in the future from the CES. The screen, actually, as I was saying before, slides over to transform into a tablet, so it ends up being something like an iPad but also with the benefit, as you can see there, with the keys instead of having to use a touch key, which sometimes isn't quite as effective, some might say.

Dan Simon is at the Consumer Electronics Show in Las Vegas, and he joins us with all the latest lowdown and also the hype. Dan, obviously we've seen this before. So many people are choosing to use this as a forum to launch all sorts of things like phablets. Run us through the latest trends, because obviously, that affects these companies and their stock prices going forward.

DAN SIMON, CNN SILICON VALLEY CORRESPONDENT: Well, it's really interesting to get a sense of the trends here at CES. Car automation is a big thing. Home automation -- this is using your SmartPhone for different things.

But one technology I want to focus on now, it deals with a problem, Nina, that we all have. And that's when we get our cell phones and our tablets wet. If that happens, if you accidentally take them into the swimming pool, you know that they're ruined.

Well, a company called Liquipel is trying to make that problem a thing of the past, and this is Sam Winkler, who's going to explain what this technology is.

SAM WINKLER, EXECUTIVE DIRECTOR, LIQUIPEL: Liquipel is watertight technology, it's a nanocoating, it's a thousand times thinner than a human hair, so you cannot see it, you cannot feel it. It doesn't affect the functionality of the electronics. However, it does protect your electronics against accidental exposure to liquid.

So, you're a hiker, you drop it in the lake, you get pushed in the pool, human environments, rain, you will be protected with the Liquipel.

SIMON: All right. And you're going to prove it to us, right?

WINKLER: I will prove it to you. So, here we have an iPhone 5. As you can see, it doesn't look any different, it doesn't feel any different. All the ports are open. However -- and it's not just iPhones. We can do tablets, computers, headphones. So, if you come into contact, you get pushed in the pool all of a sudden --

SIMON: Wow, that's amazing. So, it's a coating that's on the phone and it protects it from accidental spills, as you said.

WINKLER: Yes, anything. Whether it's coffee, dropping it in a coffee cup, or whether it's spilling a drink on it, you will be protected once you get coated with Liquipel.

SIMON: All right, now, the question for folks at home watching this is how do they get it?

WINLKER: You go to www.liquipel.com, L-I-Q-U-I-P-E-L. You can actually order it online. We're also in Malaysia, Hong Kong, about to be in China, and Australia. So you can actually get it there as well.

SIMON: All right, Nina. And I'm going to do this just so I can, you can see it. I have a phone here. There you go, right in the water. Pretty amazing when you think about it. It's a problem that a lot of us have, getting our phones wet. So, Liquipel is a coating, as you heard him say. It's thinner than a human hair and it protects your phone from going in the water. Absolutely amazing.

We're going to be here for the next couple of days. We're going to be trying to find technologies like this that really have an implication, a practical implication for everyday lives. And so we'll be bringing them to you today and tomorrow. Nina?

DOS SANTOS: We'll certainly look forward to it. I'll bet you couldn't drop one of those in that water tank. I'm deadly jealous. Dan Simon, there, at the Consumer Electronics Show currently underway in Las Vegas.

Time now for our Currency Conundrum for you out there. Which eurozone country passed a law which prevents the use of one or two-cent euro coins? Is it -- think about this carefully -- A, Finland? Could it be B, Malta? Or C, the Netherlands? We'll have the answer for you a little later on in the show.

Speaking of currencies, the US dollar is currently making a little bit of headway against the euro and the British pound. The greenback is currently flat, though, against the Japanese yen. We'll have plenty more as QUEST MEANS BUSINESS continues after this.

(COMMERCIAL BREAK)

DOS SANTOS: Two Boeing 787 Dreamliners have been grounded in just the last two days. A Japan Airlines flight due to leave Boston just a couple of hours ago has been canceled after a fuel leak was discovered.

And on Monday, a Japan Airlines 787 actually caught fire just shortly after landing, again at Boston Airport. All passengers and crew had disembarked safely, but Boeing is investigating the incident and says that it's too early to draw any parallels. Shares in this company are currently down around about 3.5 percent.

Let's bring in Richard, who joins us now, live from New York with the latest on all this. So, Richard, this must be extremely damaging for Boeing. It couldn't have been worse. They called it the Dreamliner, but it's the stuff of nightmares.

RICHARD QUEST, CNN INTERNATIONAL: Well, it is, not only for Boeing, but also for the airlines that have bought the plane. There are 830-odd Dreamliners on order, of which, by my reckoning, about 49, 50 have been delivered.

And what we are seeing is a series and repeat of teething problems, that's how Boeing describes them. The sort of glitches that are put under the spotlight because it's a new aircraft, because everybody's looking very carefully.

We don't notice the big aircraft, the 737s and the 767s and all the problems there may be with those planes, but because the Dreamliner uses new technology, ultra-light, thin carbon fibers, it's long-distance, it's a sexy plane with these great windows. Then it gets a lot more publicity at the moment.

Having said that, these are serious issues, Nina, and the airlines rightly will say to Boeing, the plane may be safe to fly, but we're pretty annoyed at these glitches.

DOS SANTOS: Yes. In fact, we had the CEO of Qatar Airways -- I believe you spoke to him recently -- who really vented his spleen on this issue.

QUEST: Yes, and not surprisingly. Akbar Al Baker was fuming. His plane was on its delivery flight from Seattle when it had an electrical problem. The United Airlines plane had an electrical problem. There was an unrelated problem with GE engines.

And now, you have two -- I mean, if you are the CEO of JAL, sitting in Tokyo, and you say, "I've spent $300 million, $400 million, or $200 million on these planes, and the first one has a fire and a battery explodes, and the next day there's a massive fuel leak," Boeing is going to have to be very careful.

On the one hand, the airlines know there are teething problems. But on the other hand, their patience will run thin if they believe -- and there's no proof yet -- but if they believe that there's something systemic, the way Boeing was built these planes, the new technologies involved. If that happens, then the airlines will be absolutely fuming, and Boeing will feel the heat.

DOS SANTOS: OK, Richard in New York, thanks so much for bringing us the latest and also putting that into context vis-a-vis the Dreamliner 787's problems for Boeing.

Now, Ireland is a bright spot in the eurozone's otherwise bleak employment market. The Irish jobs minister tells us why in his country things are getting better these days and not worse. Stay tuned.

(COMMERCIAL BREAK)

DOS SANTOS: Hello and welcome back, I'm Nina Dos Santos, this is CNN, and it's time now to take a look at the other main stories that are making news in the world.

Let's have a look at, first of all, the unemployment rate in Europe, because nearly 90 million people in the region. The area's unemployment rate climbed to a record 11.8 percent for the month of November. Spain had the highest rate at nearly 27 percent, and more than half of Spanish workers under the age of 25 are currently unemployed. Greece came a close second.

High winds and record-setting temperatures are creating catastrophic fire conditions in southeastern Australia. An official says that 140 fires are currently burning in New South Wales right now.

Northern Ireland leaders are calling for an end to the violent protest that has taken place in Belfast recently. Unrest broke out on Monday for a fifth night, sparked by the city council's decision to stop flying the British flag year round. Pro-British political groups say that they will meet this week as part of an effort to try and diffuse those tensions.

A moderate earthquake has struck off of Turkey's western coast. The US Geological Survey says that it's monitored a 5.7 magnitude quake. That was enough force to shake cities in Turkey, and also in Greece, across the Aegean Sea. There were no immediate reports of casualties or damage, though.

France's budget minister says that he welcomes an investigation into allegations that he held a secret Swiss bank account. Jerome Cahuzac, who is leading a government crackdown on tax evasion across the country, denies the allegations and says that the inquiry will give him a chance to prove his innocence. Investigative website Mediapart alleges that Cahuzac actually held an undisclosed account in the Swiss bank UBS for nearly 20 years until 2010.

Ireland is one of the few eurozone states that didn't see its unemployment rate actually rise for the month of November. Despite still being standing pat at around about a disagreeable 14.6 percent, Ireland was, it seems, a bright spot in the bloc, and I asked Ireland's jobs minister, Richard Bruton, why they've had so much success on this front.

(BEGIN VIDEO CLIP)

RICHARD BRUTON, IRISH JOBS MINISTER: Well, I think there are a lot of things happening in the Irish economy. It is an economy in transition. On the export front, we are doing extremely well. Irish companies are winning new markets and there's a resurgence of international investment in Ireland following renewed international confidence and improved competitiveness in the country.

Obviously, in other sectors, which continue to contract like domestic construction, sectors that got too large in the boom period, they continue to contract.

So what's happening is a very important transition in the Irish economy to build on new competitiveness and win new markets. And obviously build a balance of payment surplus and pay back over time our -- the growth of indebtedness that occurred in this country.

DOS SANTOS: And key to those kind of initiatives is to try and attract foreign direct investment to Ireland. You've sent up a specific body that's helped to create about 12,000 if not 13,000 new jobs. Is FDA the secret here for you?

BRUTON: Well, I think Ireland has had to trip track records going back 30 or 40 years in winning international investment. And it has been important part of building strong clusters in our economy. But it represents only 8 percent of all employment in Ireland.

So while it is strategically very important and has built strong skills, strong sectors, it is hard to be seen in that context. Still, yes, we are very successful in this area. But we have to build a more competitive economy across many areas. And I think long-term, we've to build strong indigenous sectors as well as rely on FDI.

But I think the environment for investment by international companies is particularly good in Ireland at the moment with better cost structures. You'll have big change in many areas in terms of, for example, the cost of property, the cost of employment and I think a very flexible environment for doing business which (inaudible) is determined to improve year by year.

DOS SANTOS: Yes, the flexible environment, also tax wise (inaudible) businesses, particularly important trial and to attract companies there.

Obviously that's something that continues to be an issue a debate with the E.U. which wants to harmonize tax regimes, et cetera. But let me ask you this, is it difficult to get your population into a situation where you have the skill set that some of these new companies that are setting headquarters like Facebook in Ireland want?

BRUTON: Well, I think we've had to make decisions to change our investment in education to reflect the new skills. So our minister for education, for example, has planned to double the output of graduates in ICT areas, you know, communication technology, to reflect the growth in these areas and the new economy that is to be won out there.

So, yes, we have to have made changes and I think that's going to be continuing issue. There are, of course, the difficulties of many people who were employed in the construction sector whose skills are not well adapted to the new economy that's growing.

DOS SANTOS: When do you see Ireland's unemployment rate stabilizing below the 10 percent mark? Will it ever happen during your tenure?

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