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QUEST MEANS BUSINESS

Troika Trouble; Putin's Marriage Over; Greek Tourism Minister Speaks Out; ECB Refuses to Take Sides; ECB Lowers Eurozone Growth Forecast; Eurozone Mistakes; European, US Stocks Slide; Latvia Steps Closer to Euro; Dollar Down; Make, Create, Innovate: GPS

Aired June 6, 2013 - 14:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


NINA DOS SANTOS, HOST: First the bailout, now the fallout. The EU and the IMF lock horns on Greece's rescue plan.

The time is right. Latvia's prime minister tells me why he's decided to join the euro.

And trouble on the Verizon. The US government seizes data from millions of mobile phone calls.

Hello, I'm Nina Dos Santos and this is QUEST MEANS BUSINESS.

Good evening. Tonight, the Troika is in disarray over its own handling of the Greek debt crisis. A bitter divide has now opened up between the European Commission on one side and the International Monetary Fund on the other, which together, alongside the European Central Bank, have ridden to the rescue of no fewer than five eurozone countries.

Well, the row broke out over when the IMF published its postmortem on Greece's bailout all the way back in 2010. Let's have a look at exactly what's been said in today's session over here.

The IMF report admits, as you can see here, notable failures were made as a result of its decisions at the time. Market confidence, it says, was not restored, the banking system managed to lose a third of its deposits at the time, and the Greek economy experienced much, much more pronounced recession than they had previously expected.

The report also suggested that bondholders should have taken losses or haircuts right from the vary start rather than two years later, as eventually happened.

And the European Commission has bitten back, though, saying that it, as you can see here, fundamentally disagrees with the IMF's own report. The Commission for its part argues that restructuring the debt for countries like Greece in 2010 would have certainly risked contagion to other troubled eurozone states and severely undermined the program as a whole.

As for Greece, well that country still feeling, of course, the effects of what happened two or three years ago, because the unemployment rate has continued to soar higher. Just recently, it hit a fresh record of 26.8 percent for the month of March.

Now, on Thursday, old age pensioners in Athens took to the streets to vent their own frustration. Many of these people are still, as you can imagine, struggling to pay the bills as their pensions fall and taxes rise.

The Troika predicts that Greece will return to growth perhaps next year. One industry leading the way for this country is tourism, especially during these summer months. Jim Boulden spoke to the Greek tourism minister, and he began by asking her what she made of the dispute between the IMF and the European Commission.

(BEGIN VIDEOTAPE)

OLGA KEFALOGIANNI, GREEK MINISTER OF TOURISM: It's definitely too late for us, because any mistakes have already been made and this is why we are in a recession for a sixth year in a row, and this is why we have such a high level of unemployment, which is what has definitely put the society down.

I guess that we would need some sort of restitution of this -- this wrongdoing and this admittance that there was some wrong calculations as regards the Greek bailout program.

JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: Do you think the economy is on the rebound? Have we seen the bottom for the Greek economy?

KEFALOGIANNI: Well, we're definitely now able to see the light at the end of the tunnel. There's still challenges ahead of us, but the truth is that we have done a lot of progress and the situation is much better than it was before.

This is also the reason why we've had very good comments on -- from our European counterparts, and this is encouraging to go forward with the implementation of the program.

Of course, this, don't forget, is very harsh on the Greek society, and this is why we definitely have to go back to the path of growth. And this is expected to be something that we can achieve as of next year, as of 2014. And definitely, sectors of the economy, such as tourism, can definitely help us.

BOULDEN: You're in New York, obviously, trying to drum up tourism for Greece. Do you think you're having an easier time this year explaining the Greek tourism story than you would have in the last few years?

KEFALOGIANNI: The truth is that the situation right now is definitely much better than it was a year ago, when I assumed office. I think that Greece is definitely on the rebound this year, especially Greek tourism. We have very positive messages for this year. We've seen the number of visitors already increasing and we are expecting to have a record high year. So, I guess this is good news.

(END VIDEOTAPE)

DOS SANTOS: Let's just bring you some news that's coming into us here at CNN in the last few minutes. The Russian state news agency, RIA Novosti, has been reporting that the president, Vladimir Putin, and his wife Lyudmila have separated and are now getting divorced.

There's been speculation for years about the state of their relationship. Remember that this couple married all the way back in July 1983, so this would have marked, of course, their 30th wedding anniversary just this very July. They have two daughters, Maria and Yekaterina. This ends speculation, RIA Novosti says, about the state of their relationship, speculation which has gone on for 5 to 10 years.

So, we now have news that Vladimir Putin, the Russian president, and his wife Lyudmila Aleksandrovna will be separating and getting divorced.

Let's move along and back to business news. The third member of the Troika is refusing to take sides in this spat that we were telling you about between the IMF and the European Commission over how Greece was handled when it was bailed out three years ago. European Central Bank president Mario Draghi says that Greece deserves respect.

(BEGIN VIDEO CLIP)

MARIO DRAGHI, PRESIDENT, EUROPEAN CENTRAL BANK: Let's look at the present. Greece has undertaken an extraordinary adjustment. There is ownership of this adjustment by the government, and it's -- really, we have to acknowledge the progress that this country has undertaken, has achieved. And if we look at a few years ago, it would be unthinkable.

(END VIDEO CLIP)

DOS SANTOS: That's Mario Draghi speaking a few hours ago.

Well, for the eurozone as a whole, there are no signs of imminent recovery, according to the ECB, because this institution today lowered its forecast for growth this year. The outlook is now for a 0.6 percent contraction, as you can see, in GDP, versus a March forecast of 0.5 percent when it comes to the fall in GDP that they were expecting before.

So, the ECB sees this region as a whole returning to growth next year, with a predicted expansion, as you can see there, of 1.1 percent for the eurozone. That is slightly better than March's forecast, but of course, many economists might have slightly less optimistic points of views.

Well, speaking of economists, let's get another perspective on the health of the eurozone or lack thereof these days. To do so, I spoke to Jeffrey Sachs. He's the director of the Earth Institute at Columbia University. I asked Dr. Jeffrey Sachs what he made of the clash between the IMF and the European Commission.

(BEGIN VIDEOTAPE)

JEFFREY SACHS, DIRECTOR, THE EARTH INSTITUTE, COLUMBIA UNIVERSITY: I think that Europe made serious mistakes in the last three years. Basically, until this day, the eurozone has not solved the banking crisis, and the banking crisis is extremely severe in Greece, of course, where the banks are basically bust and need to be recapitalized, as well as in the other southern tier countries.

This has been viewed too much as a fiscal problem -- get the budget under control. It has not been viewed enough as get bank lending up and going again so that small and medium enterprises can survive, people can be hired, and business can pay their taxes.

And so I think that the financial side of this crisis was under- emphasized, and this has been a serious problem all along until today.

DOS SANTOS: So, tackling the symptoms and not the causes? The ECB is also part of the Troika. Do you think it should be doing more to try and lend to small businesses?

SACHS: I do. I think that some new direct lending facilities that somehow enable credit to get to enterprise so that these asphyxiated economies that can't breathe right now can regain some life even before the full cleaning up of the banking sector, which is hard work and very messy work and necessarily it takes some years.

But you can't wait years for small and medium enterprise to get credit. An economy without working capital is a dying economy, a shrinking economy. A shrinking economy means an economy where taxes are not paid. That means large budget deficits. That's the vicious circle.

But if you don't intervene by restoring some oxygen to the economy, and by that I mean working capital for small and medium enterprise, you won't be able to solve this problem.

And unfortunately, especially the way Germany has viewed this as a fiscal problem -- get your house in order around the budget -- has not been an adequate view of the problem. And in these crisis moments, the Fund, I think, has been on the better side saying it's more complicated, but it has not been as pragmatic as necessary to come up with working solutions.

DOS SANTOS: And every so briefly, we've also seen the human capital side of the equation being extremely hard-hit with rising unemployment, terrible youth unemployment figures. What is today's report, an admission by the IMF, going to mean for other countries that are bailed out?

SACHS: Well, I think that it requires a rethink. My -- in my view -- also the United States, also Europe has not taken a very holistic view of this crisis. Obviously, this is a crisis which transcends very particular issues. It's about banking.

Of course, it's about fiscal policy to some extent. It's also about changing technology, changing work needs in the labor force. So, we need a richer macroeconomics than just saying it's austerity versus spending.

(END VIDEOTAPE)

DOS SANTOS: Investors, it seems, are apparently left uninspired by either Mario Draghi or Mervyn King because stocks fell right across Europe despite these two key central bankers speaking. S

Starting out with things in London, Mervyn King chaired his last meeting as governor of the Bank of England. The committee there, which sets interest rates, also voted to keep its stimulus plan unchanged for the moment.

And in France, we've also had another reminder of this country's economic troubles these days, because according to the National Statistics Office of France, unemployment has now risen to another high of 10.8 percent in the first quarter of the year, the CAC 40 ending the day down just south of, as you can see, the 1 percent down mark. But the London FTSE 100 was one of the heaviest losers, down 1.3 percent.

Well, US stocks are sinking ahead of Friday's jobs report. That is the key monthly jobs report that we're expecting could really move the markets. There were some fears out there that tomorrow's figures could be well down on the previous month's, and that's been fueling concerns about when the Federal Reserve may begin easing back on its ongoing bond-buying program.

Remember that we had a disappointing report on the jobs front on the ADP jobs numbers. We saw the private sector figures, and that doesn't bode well, some say, for the public sector monthly figures at the end of the month.

Well, straight ahead here on QUEST MEANS BUSINESS, a tiny country braces for big changes. Latvians prepare to head into the euro. The prime minister tells us why the time is right now.

(COMMERCIAL BREAK)

DOS SANTOS: Welcome back. The ECB has effectively waved Latvia through on its way to joining the euro. The small Baltic nation will be adopting the single currency as of January next year.

It's worth comparing Latvia's economy to that of the rest of the eurozone as a whole because the IMF, as you can see here, forecasts that Latvia's economy is probably going to grow by a much, much faster pace than some of its neighbors: 4.2 percent, as you can see there. That's way ahead of the rest of the eurozone, which is still stuck in reverse mode, shrinking at a pace of around about a third of one percent at the moment.

Well, if we take a look at unemployment, that's where the numbers are actually quite similar in this case. As you can see, Latvia's unemployment rate for the first quarter of the year stands in at around about 12.8 percent, and that's really quite close to the eurozone tally as a whole, if not even bigger. As you can see, the eurozone is at 12.2 percent for the moment.

And just before we came on air, I put it to the country's prime minister, Latvia's prime minister, that is, that joining the euro now was like running into a burning building.

(BEGIN VIDEOTAPE)

VALDIS DOMBROVSKIS, PRIME MINISTER OF LATVIA: So, the euro as a currency is doing just fine. So, what were are really seeing, we are seeing financial and economic crisis in certain eurozone countries because of some problems in fiscal and macroeconomic policies those countries were pursuing.

As, by the way, we had our own crisis in Latvia between 2008 and 2010 because of our own mistakes without having the euro. So the euro is really not the main problem here, and the euro as a currency is doing just fine.

Our currency, lats, is anyway back to euro, so whatever happens to euro anyway happens to lats. So, from that point of view, there are not many reasons why Latvia wouldn't join.

DOS SANTOS: But the one thing that you will be losing here is the economic flexibility to deal with any further downturns.

DOMBROVSKIS: Not really. Since we have a tradition of the fixed exchange rate. Already since early 1990s, we fixed our exchange rate, first to the special drawing rights, then in 2005, we repaid it to the euro, so -- and we also went through the last crisis not changing our currency back to the euro.

DOS SANTOS: Understood. But this is a one-way street. There is no looking back. There is no mechanism for exiting the eurozone once you've joined up, at least according to the current treaty framework.

So, this begs the question if people like Paul Krugman and all sorts of noted economists are betting on the euro not being around in, say, ten years from now, why sign up? Why are you so confident it will be there?

DOMBROVSKIS: Well, if we are to talk about Paul Krugman, in 2008, he was betting that Latvia would inevitably go bankrupt, that Latvia is the new Argentina, and somehow he proved wrong. So, I'm not a big fan of Paul Krugman forecasts.

But really, what we are seeing that the eurozone is, in fact, emerging from this crisis stronger than it's entered this crisis because a number of issues have been addressed in terms of its macroeconomic and financial governance.

Certainly, the eurozone had governance problems before the crisis, because if you look at the master criteria, as a criteria, they are just OK. But the problem was that eurozone countries were not following those master criteria, and there were no control that eurozone countries should stick with their own rules.

And now, those problems are being corrected, so now, really, we see that the eurozone is, in fact, getting stronger.

(END VIDEOTAPE)

DOS SANTOS: Time for a Currency Conundrum for you out there. An English treasure hunter has found $150,000 worth of gold Roman coins using a metal detector. So, the question is this evening, how long did he actually spend looking for this hoard? Was it A, 20 seconds? B, 20 minutes? Or C, 20 months?

Well, the dollar's currently down against the single currency, the euro. It's also falling against the British pound and the Japanese yen. We'll be back with more business news after this.

(COMMERCIAL BREAK)

DOS SANTOS: On tonight's Make, Create, Innovate, we meet the man who's changed the way we get from A to B. Bradford Parkinson created the GPS, or Global Positioning System. Well, this is a type of software that now tracks everything from planes to pets, even presenters like me.

This is actually my journey around London, mapped with my very own SmartPhone earlier today, and you can see the route here, coming from Oxford Circus all the way at the top of the map down the town, past Park Lane and Green Park over there, past Buckingham Palace and towards Westminster Abbey, where I was actually moderating a panel earlier this afternoon. And then, as you can see, on the far right of the chart, I came all the way back.

What's really interesting about this particular map and mapping myself is that I could see the first cab driver certainly took the long way route -- the long way around -- the longer route all the way towards where I was going to anchor that panel, where as the other one took a very, very simple and much shorter route, which probably cost me a little bit less money.

Well, Nick Glass took a trip to California to speak to Brad Parkinson about his life work.

(BEGIN VIDEOTAPE)

NICK GLASS, CNN INTERNATIONAL CORRESPONDENT: Riding along in my automobile with my little SatNav or GPS beside me at the wheel. I'm on California's famous Highway One, the coastal road, heading to meet the man who helped revolutionize the way we navigate.

GLASS (voice-over): Brad Parkinson began work on the GPS some 40 years ago, a military invention now familiar to so many of us.

BRADFORD PARKINSON, INVENTOR, GPS: GPS is a ubiquitous worldwide utility that allows you to know where you are what time it is with great accuracy anywhere.

GLASS: Parkinson is an American hero. In the late 60s, he flew combat missions over Laos.

PARKINSON: I understood the value of precision weapon delivery. I understood that it would be a humane use of a bomb if you can hit what you want to hit and not hit a mosque, hospital, or school.

GLASS: He showed me artifacts from 1981, just a few of many accumulated during the development of GPS.

PARKINSON: And this is a 2F satellite. What we are doing is calculating exactly where the center of this satellite is relative to where we are. And so, as that satellite goes around in orbit, we have stored in it where it's going to be.

So, as part of the message that comes down, it keeps saying, "I am here, time is this. I am here, time is this." We lock up on that signal, lock up on three others, and we find out where we are.

GLASS: For full global coverage, GPS needs a minimum of 24 satellites to be orbiting the Earth at any one time.

PARKINSON: In our current position, you would see 11,000 miles away, right now, there's probably 11 satellites. And what a good receiver does now, it listens to all of them and gets a stronger solution.

GLASS: But the basic requirement to pinpoint a single location, only four.

PARKINSON: And then, you not only know latitude, longitude, altitude, but also time.

GLASS: GPS didn't become fully operational until 1995. Now, it's an integral part of so many industries, from farming to landing planes, even keeping track of Great White Sharks. And the value of such a coveted technology? $100 billion a year to the American economy alone.

PARKINSON: We estimate there are over a billion GPS receivers in use today. And the reason is simple: it's that virtually every one of these devices comes with one. Do you know how much it costs? About $1.50.

GLASS (on camera): That cheap? It's amazing!

PARKINSON: And the original devices that we built probably cost a half a million dollars.

GPS VOICE: Turn right on Hill Street.

GLASS (voice-over): Brad Parkinson calls it the stealth utility.

PARKINSON: The point is, it's everywhere. It becomes something you rely on so much, you go to a strange town, dial up GPS, takes you somewhere and you say, well, how did I get here? I don't know. I followed the little arrow. I listened to the lady's voice who told me where to go. Meanwhile, you've lost your sense of how you actually did it.

GLASS (on camera): What does the future hold?

PARKINSON: I think it leads to robotic cars. I think there will come a time when you go down the highway and you don't have to have your hand on the steering wheel at all.

GLASS: As we learn new ways of using GPS, the American technology remains the standard. But the Russians, the Chinese, the Europeans, are all trying to perfect their own systems.

As for you and me, with a GPS device or a SmartPhone in hand, it's ever harder to get lost, even in the wilderness.

(END VIDEOTAPE)

DOS SANTOS: After the break here on QUEST MEANS BUSINESS, Richard asks the CEO of Cathay Pacific if the no-frills model is the future.

(COMMERCIAL BREAK)

DOS SANTOS: Hello and welcome back, I'm Nina Dos Santos. These are the main news stories that we're following for you on CNN this hour.

Russia's state news agency has been reporting that the president, Vladimir Putin, and his wife, Lyudmila, have separated and are now getting divorced. There's been speculation for years about the state of their relationship. They've been married for nearly 30 years.

Israel has moved tanks to the border of its side of the Golan Heights. It came after clashes broke out in Syria at the only crossing to the Israeli-occupied part of the area here. Well, the Syrian government troops have recaptured the crossing from rebels. So far, two UN peacekeepers have been hurt in shelling in the cease-fire zone between Israel and also Syria.

Turkey's prime minister returns home from Tunisia in a couple of hours from now. This as anti-government protests continue to rage across his country. Recep Tayyip Erdogan remains defiant, though, saying that he won't allow the minority to hijack his political agenda. The unrest has rattle investors, though, because the Istanbul Stock Exchange closed down nearly 5 percent again today.

Emergency crews are desperately working to try and keep floodwaters out of the German town of Dresden. Sandbags and silt fences are all that stands between the city and disaster. Upstream, the swollen River Elbe has also hit areas and left a number of towns underwater, and they've been underwater for days so far.

Phone records collected by the National Security Agency have used to stop a terrorist attack. This is coming from the chairman of the U.S. House Intelligence Committee.

Representative Mike Rogers isn't providing any more details about the alleged plot, while a report in "The Guardian" newspaper in Great Britain says that the U.S. phone company Verizon had handed over millions of its customers' records.

(MUSIC PLAYING)

(END VIDEO CLIP)

DOS SANTOS: Well, this week Richard has been talking to the CEOs of some of the world's biggest airlines at the IATA Conference which is currently underway in Cape Town, South Africa. And tonight is the turn at the Cathay Pacific, the international flag carrier based in Hong Kong.

(BEGIN VIDEO CLIP)

JOHN SLOSAR, CEO, CATHAY PACIFIC: Well, the most important thing always for Cathay, Cathay is a branded airline. We depend on the brand, you know, offering to people value that they can see, they can feel, they can taste and they want to get their hands on.

So for us, it's always about improving the customer experience, making Cathay always a better choice, whether it's the best business class in the world, which we were last year, whether it's premium economy, whether it's new routes, new destinations, better schedules. This is all about making Cathay an irresistible choice, because that's what's so important for our brand.

RICHARD QUEST, CNN HOST: But the negotiating, that brand significance, with the new hybrid breed that's coming into the market, is there a contradiction within that, that you're going to have to juggle with?

SLOSAR: Well, the competition is always a challenge. And competition never stays the same. By definition, it's dynamic, it changes. We need to find ways of responding to it.

But it's not just about responding to it. It's also about getting ahead of it and doing things that give your competitors problems, not just waiting for them to give you problems.

So, hence, premium economy, we've not got rolled out pretty much across our long-haul fleet. We've seen great acceptance of this. I mean, even better than we thought, which is great, because this is now a segment of economy class, OK. It's not much trade-down at all from business. A segment of economy class passengers who say if you will give me more, I will pay some more for it.

And these people will be service-centric and they will be buying their tickets based on the brand and the service they're going to get which is, for Cathay Pacific, exactly the type of passenger we want to be dealing with.

QUEST: And if you're looking at intraregional, intra-china, regional business, which, again, is core to your future, isn't it?

SLOSAR: Yes, certainly. Anything that is going to make Hong Kong a better, more convenient, more important connecting point is going to be good for us. And certainly one of the things we've done in the last year frankly maybe even more than we would have wanted to do was to expand our regional network.

We've added about 14 new smaller regional destinations. It's going to take some time to build them up. But you know what? These are the destinations of the future. These are the travel markets of the future. We want to get in there.

QUEST: Are you thinking of doing a low-cost long-haul or some low- cost version thereof?

SLOSAR: We've not done it yet.

QUEST: (Inaudible) you must be looking at scoot (ph) and thinking is it time for a Cathay scoot (ph)?

SLOSAR: Well, what would convince me of something like that, Richard, would be if I'm no longer competitive and relevant in the marketplace. And all the figures I'm looking at are still telling me I am. I'm at a point where it's telling me that I'm not, and I need to do something different, then I'll do something different.

(END VIDEO CLIP)

DOS SANTOS: Let's bring you some news that's just coming onto us here at CNN.

Prince Philip has been admitted to hospital to undergo an operation. This is coming from British media outlets. Prince Philip, remember that he was hospitalized about a year ago suffering from a bladder infection. As a precautionary measure, he was hospitalized during the Queen's Diamond Jubilee celebrations just after that.

So Prince Philip, according to the British media, has been admitted to hospital to undergo an operation. We don't know what for yet. We'll, of course, bring you more information as we get it here at CNN. Do stay with us. QUEST MEANS BUSINESS continues after this.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

(MUSIC PLAYING)

DOS SANTOS (voice-over): Time now to answer tonight's "Currency Conundrum" for you. Earlier in the show, you may remember I asked you how long it took an English treasure hunter to find a hoard of gold coins, Roman gold coins, using a metal detector? And the answer is, well, took him just 20 minutes. It was his first try as well.

His collection is thought to be one of England's largest-ever collections of late Roman coins. So he's a lucky man and he's also somebody who has had the most profitable 20 minutes of his life, probably.

Let's get back to some breaking news this hour.

(END VIDEO CLIP)

DOS SANTOS: Russia's state news agency, RIA Novosti, has been reporting that the president, Vladimir Putin, and his wife, Lyudmila, have separated and are not getting divorced.

For more on this, let's go over to our Moscow correspondent, Phil Black, who joins us life from the telephone from Moscow.

Phil, there's been speculation for years about the state of this marriage. I suppose this just confirms what many people thought.

PHIL BLACK, CNN CORRESPONDENT: Yes, confirmation of something long suspected, Nina, something long speculated about, too, and that is that Vladimir Putin, the president, and his wife, Lyudmila, have announced on Russian media this evening that they no longer share their lives with one another.

Now Russian leaders' wives normally play a fairly low-profile role in their husbands' careers. But even by those Russian standards, Lyudmila's absence from public view had generated a great deal of speculation over time, a great deal of gossip and rumor, especially online, some of it a little cruel and perhaps a little outlandish.

Talk is of a monastery was often quite common in a lot of this sort of Internet rumor. Whenever Putin himself was asked about it, he would often say that his wife simply didn't sign up for the public attention in the way that he did. And she preferred to keep a low profile.

Now the last thing to get out, only this week, in fact, on Tuesday evening attending the ballet, but before that, the last significant public appearance was in May last year at his inauguration, as he returned for this third term as president of this country.

So there has always been a great deal of speculation, particularly it came up again around January this year, around the time of her 55th birthday when it simply passed without mentioning in state media, from public view, even Putin himself didn't seem to acknowledge it in any way.

So not a great surprise, but at the same time, somewhat surprising that they had decided to announce it now publicly, after enduring so many years of speculation and gossiping.

DOS SANTOS: There's also been speculation that President Vladimir Putin may have had affairs as well. Run us through some of that.

BLACK: Well, there has been, as I say, amid all of that rumor and talk about where is Lyudmila, to what extent are they still married, there has been a lot of talk, a lot of gossip, both online and among political circles in Moscow that Vladimir Putin was in relationships with one or more women. But there has never been anything to substantiate that.

It is something that the Kremlin has always taken a very stern line on in denying; it's always insisted that that is simply not up for conversation, not up for comment. And so for -- Putin has always maintained that a politician's private life is a private life and it should not be dissected by the public as it is in the West and so forth.

So while there has been both the speculation about what happened to Lyudmila and in the meantime, what has happened -- what has Vladimir Putin himself been getting up to, if you like, none of that has ever been confirmed publicly.

This is the first time, really, these two very well-known figures in this country and internationally as well, have given any sort of public confirmation on their private life and they are now, as we say, confirming what has long been suspected. They are getting a divorce, if they are not divorced already.

DOS SANTOS: OK. That's Phil Black there in Moscow, joining us on the telephone, thanks for bringing us the latest there on that breaking news that Vladimir Putin, the Russian president, and his wife, Lyudmila, of nearly 30 years, are getting divorced.

Let's move on to more news that's just in to us this hour. Now Buckingham Palace has confirmed that Prince Philip, the Duke of Edinburgh, has been admitted to hospital for an exploratory operation, it seems. Let's go over to our correspondent, Max Foster, who joins us now live with more on this.

What do we know, Max?

MAX FOSTER, CNN HOST: Well, it's just a very simple statement, His Royal Highness the Duke of Edinburgh has been admitted to the London Clinic for an exploratory operation following an abdominal investigation. He's expected to stay in hospital for up to two weeks.

Two weeks is a long time and normally on these statements we would get -- we would be given a defined period. It would be a few days or something. So two weeks is a long time. The London Clinic, which is looking into what sort of specialism it has. But normally there's another hospital that they would automatically go to.

And also there are medical professionals close at hand as well in the palaces. You can handle these things. Further updates will be issued when appropriate. There's a lot of pressure on the palace right now. Prince Philip earlier this week canceled a couple of engagements because he was feeling under the weather, as I was told. But this now looks a lot more serious.

We did see him on Tuesday out at an event, marking the Queen's coronation. And he looked drawn and tired, but you know, if he had been under the weather, then he would have done. But now it seems abdominal investigations, seems like a more serious concern, really, on the palace. So we'll have to see.

But certainly it looks serious, two weeks in hospital. And to say that, at this point, would be a guesstimate obviously, but they're looking at the medium term, not the short term.

DOS SANTOS: Two weeks in hospital will also mean that he had to spend his 92nd birthday in hospital. That's only four days away from now. This is an elderly man, after all.

FOSTER: Yes, and any sort of illness at that age, obviously, is a concern because if infection set in, then you could get control of it very quickly. And perhaps the palace would argue that it's erring on the side of caution. It's just this two-week sort of window that I'm looking at in the statement. It's interesting that they'd say two weeks. Otherwise, it would have been just investigations.

DOS SANTOS: That's right. We've been here before, haven't we, after the Queen's Diamond Jubilee celebrations, he was admitted to hospital with a bladder infection. Is there any sign that this may be a repeat of that or, indeed, how worried are palace officials?

FOSTER: Well, I haven't managed to speak to them, because we literally just got the statement and I've been on air since. But they're not saying it's this infection. But then it hasn't been diagnosed yet.

But I mean, I'll keep going back to the two weeks, because if it was an infection, they would say he would be going in for checkups and the most they will be saying, he'll be in for a few days or we can't say how long he's going to be in. They're saying two weeks, so they're bracing us for something more serious.

DOS SANTOS: OK, Max Foster, royal correspondent, bringing us the latest on that.

Let's just recap our two pieces of breaking news that we've heard so far this evening.

You've just heard about Prince Philip there, being admitted to hospital, but also in Moscow, Russia's state news agency has been reporting that the Russian president, Vladimir Putin, and his wife, Lyudmila, are now getting divorced. There's been speculation about the state of their relationship for years now. They've been married for nearly 30 years, but they will be getting divorced.

And as we were saying before, Prince Philip, the Duke of Edinburgh, has now been admitted to hospital for an exploratory operation. Max Foster was just telling us he's expected to remain in hospital for two weeks.

And that's it for QUEST MEANS BUSINESS. Thanks for joining me. I'm Nina dos Santos in London. MARKETPLACE EUROPE continues on CNN.

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RICHARD QUEST, CNN HOST: From Northern Germany, this is MARKETPLACE EUROPE. I'm Richard Quest. Being more precise, I'm on a building site in Schwerin, about 120 kilometers from Hamburg. It's the site of Nestle's new factory, worth hundreds of millions of dollars. And in this program, the chief exec of Nestle will explain why he chose to build the factory here.

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PAUL BUICKE, CEO, NESTLE: We look at the long-term characteristics of the place and the dynamics of the place. That is what counts. We are here building a factory. That and actually we want to be here in 100 years' time.

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ISA SOARES, CNN CORRESPONDENT: We'll be back with Richard in Schwerin a bit later in the program.

Unemployment in the Eurozone hit another record high in April with almost 19.4 million people out of work. With a jobless rate of 5.4 percent, Germany is the envy of Southern Europe. In Greece and Spain, over a quarter of the population are out of work. Here in Germany, though, skill shortages have led businesses to look further afield for workers.

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SOARES (voice-over): In a small town near Stuttgart, two Spaniards listen attentively to their boss. They are the new features of De Dialabeg (ph), a midsized company that makes electrical ventilators and motors.

PETER: We are a multinational company on the global -- and working on the global market. That means we have to have international people speaking English and local languages and we (inaudible) keen to get these people on board.

SOARES (voice-over): On the factory floor, the workforce is German. But the research and development department is drawing in highly skilled engineers from across Europe.,

PETER: From the '70s, the '80s and early '90s we have an innovation cycle of 15-20 years. Now we are innovating 21/2 to 3 years right now. So it's a high investment and we put a big share of our profit into innovation. But it pays off.

SOARES: This is the largest ventilation and noise test chamber in the world. It's here they test their fans to the extreme. Holding it all up, 1,250 tons of concrete set on springs, 100,000 cubic meters of air is blown through these absorbers directly into these fans, which have to cope with up to 3,000 tons of pressure.

SOARES (voice-over): Balancing the workforce is something this business takes as seriously as balancing the fans it produces. Two million of them a year. In the last year, it hired people from as far afield as Rumania, China, Portugal and several Spaniards like Cristina.

"I lost my job back in November in Spain. (Inaudible) gave me four months' work experience. (Inaudible) offered me a contract."

Germany's appeal as a job destination is (inaudible). Immigration is at a 17-year high. Last year, 390,000 immigrants made their way to Europe's largest economy, 72,000 from Portugal, Greece, Italy and Spain.

Jordi was in a well-paid job back home in Spain, but he wanted the experience of working for an international company.

JORDI MAS GILI, ENGINEER: I started here on September last year. They also lent me an apartment to stay from September to October. And they also pay a German course for me and for my girlfriend.

We like the people. We like the country. We like the countryside and right now we cannot see any reason why we would go back to Spain.

SOARES (voice-over): Others, though, could decide to return home. For the company, it's a risk. Still, it's committed to investing in Southern Europe's best and brightest.

PETER: (Inaudible) to an individual to get him or her into the position being able to give us any benefit for the company. (Inaudible) to get them to (inaudible).

SOARES (voice-over): An investment that long-term may just help reshape his business.

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SOARES: Coming up after the break, Richard Quest speaks to the CEO of Nestle about why he's decided to build a factory near Hamburg.

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QUEST: These are the pods of dolce gusto coffee made by Nestle. Welcome back to MARKETPLACE EUROPE. I'm Richard Quest in Northern Germany. When this factory opens next year, more than a billion of these will be manufactured and distributed from here each year. It's part of the single serving revolution that's underway in coffee.

The chief executive of Nestle explained why he chose to build this factory right here.

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That's where we are now.

QUEST: We're here.

BUICKE: We are here. That's the way you come in, you see? And these are the pillars. You'll see here.

And there there is a land of 55,000 square meters. This, only this, so we can actually grow here. Here, we're going to have five, six lines with a space for six more lines. That's 2 billion castles (ph) potential a year.

QUEST: That's an enormous amount of land, space, factory, (inaudible) for coffee.

BUICKE: Yes, exactly.

QUEST: It's huge.

BUICKE: Yes. But that's how it works.

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BUICKE: For this specific product we're going to produce here is Nescafe Dolce Gusto, Germany is going to -- is the biggest market we have. So the consumers are quite close here. And part of the factors are, for example, where is the aromatillo (ph) coming from? And we think of coffee, coffee is coming through a harbor. A harbor here, Hamburg, is very close by.

Then certainly, where is the future? Where are you -- we're looking for growth. And the northern part of Europe is something we want to develop still. And (inaudible) and East Europe, so you are here on the crossroad of Europe northeast, so also this. Then you have space here to build. So then you have also a -- I would say a government that says come and build here. We want to be part of this.

QUEST: How --

BUICKE: --attitude.

QUEST: -- how important are things like assistance, whether it be tax breaks or assistance in the construction, in making that decision?

BUICKE: Well, it's an equation. It's part of an equation. Not a big part, though, because we wouldn't do here a long-term investment for a short-term benefit somewhere that -- so we look at the long-term characteristics of the place and the dynamics of the place. That is what counts. We are here building a factory. That factory we want to be here in 100 years' time.

QUEST: It's a huge operation, Nestle, isn't it?

BUICKE: Oh, we have thousands of brands. We have something like 30 brands, though, that are, each of them, doing more than 1 billion Swiss francs in turnover and sales. And when you add these 30 brands and the fact that they do something like three-quarters overall turnover, overall sales, so we do have focus.

Yet at the same time, we embrace local brands, too, because at the end of the day, who owns the brand is the consumer.

QUEST: Whether it's an issue of nutrition or an issue of food safety or an issue of the environment or labor relations or whatever it might be, do you ever get weary of the critics who just keep beating up companies like Nestle, without necessarily having any idea of the policies underneath it and the effort that you go to?

BUICKE: Look, sometimes you say, where is that coming from, why? And what is the answer? Back off? No. it's just engaging. And I mean a company like ours -- in my country we say high trees catch more wind. And we are big company. And we are visible. And we are present in many areas. And we are criticized.

And we don't do things that everybody likes the same, because our conception, our conviction is different and than some angles that are given to. And then we have to engage where we can. Sometimes there is no engagement possible because there are so different agendas. So we have to be true to ourselves.

We are a principle-based company, not a rule-based company. We have very strong principles. And if you say (inaudible) long term above short term, something the world has to cope with still, but short term cannot prevail on long term.

QUEST: As we look at Europe at the moment, 12 percent unemployment, 12.2 percent unemployment today, 24 percent, 25 percent youth unemployment, this is turning into the biggest single scourge of a generation, isn't it, the biggest single crisis that we're facing?

BUICKE: I think it's even worse. It's not only the 12 percent, it's the 55 percent of youth unemployment. It is in certain parts of -- 27 in France, and so on. I do believe that we are creating there a generation of -- with tensions because at the end of the day, why do we have a problem in Europe?

Because we have lived on credit and now it's like having a big party for many, many years; you have to clean up the house. So we have to (inaudible). The purpose of this generation, the let's clean up the house, it's the purpose. Let's do that for those generations. Let's be productive again.

So I think we are somewhere on a crossroad that goes right beyond the tomorrow decision, political decision. That goes off perspective on where can Europe fits in that global world that is actually looking for growth. And I do believe we have many -- we have many cards to play. And you -- we are investing here in Europe.

We have been growing. Nestle has been growing in Europe, you know. Also in Greece we have been growing. While because I feel the strength, I believe in it; we have trust. And I hope one day we're going to get there. But there's a little bit lack of political leadership. And leadership is needed to do the things you have to do although you don't like them.

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QUEST: The chief executive of Nestle.

Now, I'll get the hang of this eventually. And that's MARKETPLACE EUROPE for this week -- espresso today, I think -- and I'm Richard Quest in Schwerin, Northern Germany.

Whatever market you're in, I hope it's profitable. I'll see you next week.

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