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Quest Means Business
Greek Unemployment Crisis; Spain Unemployment Rate to Remain High; Austerity and Unemployment; Samaras at White House; European Markets Up; Sponsors Pull Out of Website Over Cyber Bullying; Tackling Trolls; Policing the Web; Battle for Dell
Aired August 08, 2013 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, HOST: It's a case of no jobs and no end in sight. Greek unemployment has hit a grim new record.
Also, boycotting the bullies. Sponsors drop from websites infested with trolls.
And a departure lounge discount, but this time, you buy your whole -- your own Spanish airport at a bargain basement price.
I'm Richard Quest, today live from CNN New York where I still mean business.
And a very good afternoon from New York. Europe's jobless crisis has reached an ugly milestone in Athens. Unemployment in Greece is now the worst it has ever been, 27.6 percent of people. Just look at that number, 27.6 percent are out of work. And amongst the young, the figure is just about 65 percent.
This chart shows the brutal downward trend since 2008. Repeated doses of austerity and devaluation -- or internal devaluation, as they call it -- have seen nearly a million people disappear from the workforce. Only one in around 3.5 million people still have jobs. And for those without, destitution is becoming a distressing reality.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE (through translator): things are getting worse day by day. Where's the growth? Where are the jobs?
UNIDENTIFIED MALE (through translator): The business I work for has closed. I am 66 years old, unemployed, and will not get a pension. I am looking in the garbage to find something to eat.
(END VIDEO CLIP)
QUEST: That's the reality of the situation in Greece. But the unemployment there is almost unparalleled in Europe, not quite. Spain is the other eurozone country facing near same levels of joblessness. The IMF said last week it expects Spanish unemployment rate to remain above 25 percent for at least the next five years. Five years.
Now, just bear this in mind. The UK's jobless rate at 7.8 percent barely ranks in comparison, and the Bank of England yesterday -- we talked about it on this program -- tied interest rates to it reaching 7 percent. It will not raise rates until unemployment falls to that level. It just shows you this enormous disparity that exists within the European Union.
Constantine Michalos is the president of the Commercial and Industrial Chamber of Athens. Constantine, there are very few adjectives that one could use that fully explain or describe the awfulness of these levels of unemployment. So, what needs to be done?
CONSTANTINE MICHALOS, PRESIDENT, COMMERCIAL AND INDUSTRIAL CHAMBER OF ATHENS: Well, Richard, as you said very correctly, it's -- this package, austerity package, or rather austerity upon austerity is simply not doing the trick, because we've got the pan European record as far as unemployment is concerned, and therefore we need to regenerate the economy.
We've reached this level today as far as our figures are concerned, which seems to provide some optimism as far as the eurozone -- northern eurozone members are concerned. What we need to do now is to attract new investment, both local investment and foreign investment.
I think the reason why Prime Minister Samaras is visiting today President Obama is to set forward this proposal in order to be able to attract American capital --
QUEST: OK --
MICHALOS: -- in Greece so that we can begin to regenerate the economy.;
QUEST: But is there any evidence that what economists call "internal devaluation," this bone-crushing austerity, which is supposed to make the Greek economy more competitive. And there has been some numbers from the IMF suggesting that's happening. But is there any evidence of investment coming back yet?
MICHALOS: Not yet. Absolutely. And this is where we differ with our eurozone members as the recipe of the economic policy which has been applied here in Greece over the last three, three and a half years. We indicated right from the beginning that this wasn't the right solution and we needed to change course.
This is not a Greek problem only, Richard, and you know that very well. You were mentioning earlier on the Spanish figures. It is a European overall south European problem, and this is what we need to address.
We need to go into a different economic policy, such as the US. We need to go into quantitative easing period so that we can begin to regenerate the economy.
QUEST: OK --
(CROSSTALK)
MICHALOS: A little bit of impatient --
QUEST: Well, let me -- but let's just -- let's just -- OK, let's just talk on this. It's the summer season at the moment, the height at the tourist season for Greece. Now, you should at least be doing well during this period, although I have to say I can imagine it's not much fun going on holiday if the place is in a recession and half the people are -- more than half the people are out of work. Is there evidence that tourism at least is holding up?
MICHALOS: Of course it is, and we're aiming towards a record year this year. We're expecting 17 million visitors, which is going to be a record as far as the Greek tourist industry is concerned.
And let's face it, tourism is the heavy industry that Greece has. We're not a productive economy in the industrial sense, but this service, the tourist service, is our heavy industry, and we're aiming towards this new record this year, which will supply us with enough optimism to face the next season, hopefully reaching 20 million next season.
So, there are glimpses of optimism at the moment, but this is just one sector of the economy that is doing well. We need to regenerate the rest, and in order to do that, we have to change the economic model. And by doing that, we need to regenerate liquidity --
QUEST: All right.
MICHALOS: -- because the main problem, Richard, at the moment is the lack of liquidity within the banking sector as a result of this austerity that is being applied to Greece over the last three and a half years.
QUEST: Constantine Michalos, we'll talk more about this as the weeks continue. Many thanks, indeed, for joining us tonight from Athens. The numbers are truly awful, particularly when you bear in mind US unemployment heading down towards 7 percent.
And the Greek prime minister is in Washington, as we were just saying, meeting Barack Obama. Antonis Samaras is looking for supporting as he prepares for new talks with creditors. So, what can he get? What can a -- at the end of the day, Jim Acosta, our political correspondent at the White House. This is something for Brussels, for the ECB in Frankfurt.
JIM ACOSTA, CNN US POLITICAL CORRESPONDENT: Right.
QUEST: So what can Obama offer from Washington?
ACOSTA: Not much, Richard. I have to be pretty blunt with you. We'll have to see what the White House says about this meeting between the prime minister and President Obama that is supposed to happen, really, any time now.
But the president can say -- and I think many politicians from both sides of the aisle here in the United States can say that they have sort of an unemployment problem of their own over here.
But it's interesting to see that the Greek prime minister is coming here, that he's talking about these issues that they have with the Greek economy, which are very severe, 27 percent unemployment, that is obviously way higher than what we see here in the United States.
But when you hear about Greece here in the United States, what you hear is from a lot of Republican politicians saying if we don't get our fiscal house in order, that's the direction we're heading. We're heading in the direction of Greece. And it's interesting, this whole debate over stimulus versus austerity that is happening in Greece, happening over in Europe.
Richard, as you know all too well, that is happening hear in the United States as well, and there are threats that are coming from the Republicans right now up on Capitol Hill that, for example, if they don't defund the president's health care law, aka Obamacare, there's going to be a government shutdown. And so, this debate's playing out here as well.
QUEST: Now, this interesting question: one of the biggest insults seemingly -- and I've covered the budget crisis along with yourself, Jim, and we know this well -- one of the biggest insults that's now thrown at politicians from either side is "We'll end up like Greece."
ACOSTA: Right. That's it. That's exactly right. Mitt Romney talked about it out on the campaign trail in the 2012 election. And as a matter of fact, he was at a closed-door fundraiser earlier this week where he talked about we don't want to go in the direction of Greece.
So, unfortunately for the Greeks -- and I've traveled to that country, I know it fairly well, and it's a beautiful place. But it is sort of held up as the economic and fiscal bogeyman over here in the United States as to something that the United States does not want to become.
Having said all of that, White House officials are saying that the president is going to be supportive of these efforts to get Greece's fiscal house in order. And those comments that were made by your guest previously, I think, would probably go a long way in encouraging Americans to thinking that Greece is at least moving in that direction.
But really, when you look across the globe, Richard, and you know this, this is a problem for everybody.
QUEST: Absolutely. Put it in one. Got it in one, there, Jim. Many thanks.
ACOSTA: OK.
QUEST: Jim Acosta --
ACOSTA: You've got it.
QUEST: -- who's at the White House. So, Samaras is in Washington, the unemployment numbers are dreadful, and yet Greek stocks shot up ahead of the meeting between the US president and the Greek prime minister. Clearly the market is hoping for something more than the political pundits seem to suggest will actually happen.
The Athens General was up 2.5. percent, outstripping other markets. The stocks were boosted by Chinese trade data, improved numbers from Germany. In Frankfurt, Commerzbank closed up more than 16 percent after reporting better-than-expected second quarter numbers.
We have been talking a great deal on QUEST MEANS BUSINESS, and we will continue to talk about the issue of online trolling, internet trolling. Now, the advertisers are starting to speak, walking away from a controversial social media site linked to a teenage suicide.
When we come back, the companies, the charities, and the prime minister taking a stand against cyber bullying. QUEST MEANS BUSINESS.
(RINGS BELL)
(COMMERCIAL BREAK)
QUEST: Advertisers have begun to pull out of a popular social media website following a teenage cyber bullying victim who took her own life. The 14-year-old British schoolgirl Hannah Smith had apparently been targeted by trolls. Now, we talked about this extensively yesterday.
Some charities and big companies have stopped advertising with ask.fm, which is said to have more than 60 million users. Laura Ashley, Vodafone, Specsavers, Save the Children among others have all now insisted and told their brokers to remove advertising from the ask.fm site.
Specsavers, which is an opticians company, told CNN, "We've instructed ask.fm to remove all our advertising from their website due to our deep concerns about cyber bullying."
The sentiment is shared by Save the Children charity, who told us, "We are putting the welfare of children first, and as a result of the tragic case of Hannah Smith, we no longer advertise on ask.fm."
Dan Rivers now reports on the problem and speaks to some British teenagers who appear especially aware and are cognizant of the dangers.
(BEGIN VIDEOTAPE)
(YOUTH SINGING "JET SONG" FROM "WEST SIDE STORY")
DAN RIVERS, CNN SENIOR INTERNATIONAL CORRESPONDENT (voice-over): At the Stagecoach Drama Workshop in Winchester, teenagers are kept busy during the long summer vacation.
(LAUGHTER)
RIVERS: But even so, they're never far from logging onto social media websites with their phones, including ask.fm, the site where 14-year-old British schoolgirl Hannah Smith was bullied. She later committed suicide.
Though ask.fm says it's trying to combat bullying, posts are anonymous, which makes cyber bullying easier. Already, advertisers are pulling their business from the site.
UNIDENTIFIED FEMALE: It could be anyone --
RIVERS: These teenagers are all too aware of the dangers of cyber bullying.
RIVERS (on camera): So, what's your experience of being bullied online?
UNIDENTIFIED FEMALE: Well, it upset me, of course, like it would with anyone. But at the start, you kind of just dismiss it and hope it will stop.
RIVERS: Some people would say, why don't you just log off?
UNIDENTIFIED FEMALE: You should log off, but people -- if people found out you logged off, they could think that that's more way to abuse you because then you've backed away.
UNIDENTIFIED FEMALE: It's quite hard to log off and -- because you know it's still there.
UNIDENTIFIED FEMALE: I think sometimes with that sort of thing, it can start off with a joke, but then people just don't realize how serious it can get.
UNIDENTIFIED MALE: They feel bigger and more empowered when they're behind a computer screen.
UNIDENTIFEID FEMALE: Yes.
UNIDENTIFIED MALE: And it makes them -- they'll say stuff that they wouldn't say to you face to face.
RIVERS: What would be your advice to teenagers who do get a lot of abuse on something like ask.fm? How -- what would you tell them?
UNIDENTIFIED FEMALE: You need to make sure you tell your parents, because they will always be there for you and they will stop it. Because if you don't tell anyone, then it will just get progressively worse.
RIVERS: Is Facebook essential?
UNIDENTIFIED MALE: It's not essential, but it's become such a big part of teenagers' lives now. And even my dad has it. So --
RIVER: So, it is essential.
UNIDENTIFIED MALE: It is essential in this day and age, really.
UNIDENTIFIED FEMALE: My parents do say, "Oh, why don't you just ring them," you know? Like in the olden days. I'm like, well, no, it's just times have changed and stuff.
DAVID CAMERON, PRIME MINISTER OF BRITAIN: That's you. So, you're in charge.
RIVERS (voice-over): British prime minister David Cameron during a visit to a hospital on Thursday was highly critical of anonymous posts on social media websites like ask.fm.
CAMERON: There's something all of us can do as well as parents and as users of the internet, and that is not use some of these vile sites. Boycott them. Don't go there. Don't join them. We need to do that as well. So, I'm very keen, we look at all the action we can take and try and help stop future tragedies like this.
RIVERS (on camera): In a survey by a British child protection agency, 38 percent of children asked had experienced some form of online bullying. It is a massive problem in countries like the UK. The death of Hannah Smith shows how serious it can be.
Dan Rivers, CNN, Winchester, England.
(END VIDEOTAPE)
QUEST: The social networking website ask.fm released an open letter today conveying condolences to the family and friends of Hannah Smith. The company says it's working with police investigating the suicides.
The letter says, and I read, "We do not condone bullying of any kind. We are constantly working to improve our website, including its safety features. We are currently working on a series of updates with more safety features and information."
The web has often been likened to the American wild west of yesteryear. So, let's bring in a web sheriff, a third party company which promises to deal with internet piracy, trolls, even stalkers. The chief executive, John Giacobbi, is in our London bureau, joins me now. John, we need to take this bit by bit, and we need to have an element of sober discussion here.
JOHN GIACOBBI, FOUNDER AND CEO, WEB SHERIFF: Sure.
QUEST: Because what realistically -- these companies, like ask.fm, which have grown so fast, they simply cannot put in place the necessary procedures in time to deal with this, surely.
GIACOBBI: Actually, I wouldn't necessarily agree with that, because at the end of the day, these social media networks have millions of members and often millions or billions of dollars worth of revenue. So, they have all the advantages of that scale.
But with that, they also need to be obliged to accept the responsibilities, and that means instead of paying out millions or hundreds of millions of dollars to their shareholders in share options and payouts and so forth, they should actually reinvest more into their own governance, and importantly, into abuse procedures.
QUEST: Isn't this a case where it is only -- this thing is literally being made up as we go along. We've known about, obviously, bullying since Adam and Eve and the apple, but --
GIACOBBI: Yes.
QUEST: -- we've never seen anything on this scale because ask.fm, for example, could be getting hundreds of thousands of new members every week. Now, if only a small percentage pushes a report abuse button, you get swamped.
GIACOBBI: Well, there are two issues here, and as we've seen from the very tragic suicides recently of young teenagers using these networks, with the report abuse procedure, I think there needs to be a presumption of wrongdoing. In other words, a presumption of guilt.
So, if you press the report abuse button, the tweet comes off or the post comes down straight away, and then it's investigated, as opposed to the other way around. Because the way it is at the moment, you can report something, and it can still say there for days or weeks or basically not be removed at all.
And as I say, these companies do not invest enough money in the welfare of their own membership. So, there are two -- there are two protections --
(CROSSTALK)
QUEST: But you say that, and I'm not -- I'm trying -- I'm not taking sides in any shape or form --
GIACOBBI: Yes.
QUEST: But you say that, but you get the statements in which, for example, ask.fm, which says clearly, we don't condone this, we're looking what needs to be done --
GIACOBBI: Yes.
QUEST: -- we're going to do more. If we take Twitter and Facebook, for example, Facebook has led the way in many cases in putting in places as procedures have become available or problems have become clear.
GIACOBBI: Well, I'll give you a statistic that kind of points out the problem very clearly. In 2011, which is the last year for which there are full data, our company, Web Sheriff, was actually responsible for over 50 percent of all global takedowns on Twitter.
Now, that shouldn't have to be the case. They should do it themselves. It shouldn't be -- have to come to a hired gun such as ourselves to police Twitter. They should police themselves.
QUEST: Right. Let's talk about how you do this. You're a hired gun, you're a sheriff for this sort of -- what do you do? Say I, somebody is saying something particularly unpleasant about me, I report it to you. You -- what do you do?
GIACOBBI: Well, essentially, unlike the members of the public, we have established relationships and even contracts with a lot of the big social media companies, so we have expedited procedures for taking things down, or in some cases, we can actually remove things ourselves.
Now, to give you an example of this kind of scale, I'm very sorry to say that Twitter is probably the worst. Twitter, even though we've removed a vast amount of things from Twitter, it's always like pulling teeth. It's always a difficult thing to do.
So, if it's difficult for us, you can imagine what it's like for some poor, stressed-out teenager who's suffering from cyber bullying.
QUEST: But --
GIACOBBI: In the middle -- or sorry -- at the other end of the spectrum, you have YouTube, who generally speaking, are excellent. They've really put in place excellent procedures for removals. And somewhere in the middle is Facebook, who are good and bad in parts, should we say?
QUEST: Of course, YouTube takes down a lot of copyrighted material, where it already has a digital fingerprint in it, in many cases, and so that has an element of sophistication. But are you finding, as the sheriff, are you finding yourself swamped with people now saying to you, John, I need help. Get this down.
GIACOBBI: Absolutely. Because these days, you don't have to be a rock star or a Hollywood A-lister to have problems on social media or internet-related problems. It affects everyone. It affects small businesses, the general public, even schoolchildren, as we very sadly know.
So, everything from impersonation to harassment to e-fraud. So, it's something that really needs to be addressed. And if I can just interject one thing. On the one hand, there's hired companies such as ourselves. There's also the social media networks who should do more, definitely do more to police themselves.
But ultimately, the government -- and David Cameron just today was talking about why are these things being allowed to happen? Now, the government has the opportunity to introduce fixed penalty offenses. A bit like car parking.
So, if you issue a tweet or you make a post that crosses certain defined lines, basically, you get a notice coming through in your e-mail saying --
QUEST: All right.
(CROSSTALK)
GIACOBBI: -- here's a $50 fine --
QUEST: I need you --
GIACOBBI: -- you can either pay it or --
QUEST: -- I need you to define that line.
GIACOBBI: -- or you're forced --
QUEST: I need you to define that line. A tweet that says "Richard Quest, I think you are the worst thing since sliced bread and I can't stand you." Fine. "Richard Quest, I want you dead." Is that crossing the line?
GIACOBBI: That crosses the line, and also kind of "Richard Quest is a sex offender" or things of that nature.
There are -- it needs to be quite straightforward for these social media companies, in conjunction with the DPP and the United Kingdom and also kind of the FBI or the relevant federal agencies in the States to come up with guidelines as to what is and isn't acceptable and what crosses the line.
QUEST: John, we'll talk more about this. Come back and talk more about it. Important --
GIACOBBI: Thank you very much.
QUEST: And of course, if you've got some views on what this is all about, then you can, of course, tweet us. We want to hear your views on this. It's @RichardQuest. That's where you can join in our debate on the issue of internet trolling, @RichardQuest. We'll show you the address on the screen in a little while. This is QUEST MEANS BUSINESS.
(RINGS BELL)
QUEST: Good evening.
(COMMERCIAL BREAK)
QUEST: The billionaire investor, Carl Icahn, has told CNN he believes the board of Dell has made it too easy -- too easy -- for the founder, Michael Dell, to try to take the company private. Mr. Icahn has upped his stake in the giant company to the tune of 4 million more shares. He's an activist investor, and he's doing everything he possibly can to stop the bid, and he told Felicia Taylor why.
(BEGIN VIDEOTAPE)
CARL ICAHN, BILLIONAIRE INVESTOR (via telephone): I just think that these last four or five years that stock really hasn't -- has actually come down quite a bit, if you look at the chart. So, I think it needs new leadership. But the real issue is that we have is that I think the board has just gone way out of their way to make it easy for Dell to buy it.
FELICIA TAYLOR, CNN INTERNATIONAL CORRESPONDENT: When it comes, though, to the lawsuit that you've also recently filed, what makes you think that you're going to have any headway with that in the idea of getting both of those votes to occur on the same day?
ICAHN: We think it hurts us and damages us to have the gap period between the actual proxy fight. We would come in and do the restructuring, and the money that they're giving on September 28th, if they win that fight.
So, in other words, there's a vote September -- I believe it's September 18th. They were turned down three times by the shareholders, so they upped the ante, as you said. It gives them a big advantage if the shareholders don't have another opportunity at the same time to vote for a slate, we're going to do a restructure.
So, we feel that there are damages. And the law is that you're supposed to have your meeting in 13 months. They haven't complied with that law. And it's especially -- the law is especially enforceable if there are damages. So, we hope that our theory will work. It has in the past in several of these cases.
(END VIDEOTAPE)
QUEST: Carl Icahn, a man who absolutely knows the value of a good shareholder proxy fight.
It's been a big day for Groupon. A sales jump, a new chief exec, and now a bumper day on the NASDAQ. In a moment.
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest. There's more QUEST MEANS BUSINESS in just a moment. This is CNN and, on this network, the news always comes first.
(BEGIN VIDEO CLIP)
QUEST (voice-over): Security officials in Yemen say 10 people have been killed by two suspected U.S. drone strikes. The targets were hit in two Yemeni provinces. Six suspected militants and two civilians are thought to be amongst those that were killed.
U.S. State Department says peace talks between Israel and Palestine will resume next Wednesday in Jerusalem. A meeting in the West Bank will follow. The two sides held their first peace negotiations in three years in Washington last week.
Diplomatic sources say two young British women injured in an acid attack are expected to leave Tanzania today. The women were attacked by men on motorcycles in the historic area of Stonetown (ph) on the island of Zanzibar. They were volunteering as teachers on the island.
At least 30 people are dead in Pakistan after a suicide bomber struck a funeral for a police official. People were lining up for the funeral procession at a mosque when the blast went off. The police chief (inaudible) says most of the 30 victims were police officers.
(END VIDEO CLIP)
QUEST: Shares in Groupon are up around 26 percent. (Inaudible) bell. After the daily deal website said it had better than expected quarterly sales and announced a new permanent chief exec. It said it will repurchase $300 million of its own shares over the next two years.
Maggie Lake is with me.
Maggie, is that rocketing price because it's buying its own stock or because people believe it's found a turnaround strategy?
MAGGIE LAKE, CNN CORRESPONDENT: Well, Richard, certainly when you're repurchasing your stock it's going to help. And I think there's more to it than that, certainly. There was some good news in the air, but I love it, a 26 percent rally for a company that's still losing money, only on Wall Street, right? But it is all about those expectations.
And listen, this was a company that at one point looked like its time has passed, a good idea that was quickly overrun by others. But they did come out. They lost less money than was expected. And this was, I think, the really important thing and what people are grabbing onto. Fifty percent of North American sales came from mobile devices.
So just that same conversation we're having with other tech companies, if you are figuring out how to sort of get onto the mobile, into the mobile ecosystem and find users there, that's important. And that's what people are responding to.
And this new CEO, this Eric Lefkofsky (ph), is one of the original investors. The fact that they -- there's a lot of controversy surrounding Andrew Mason, the fact that they now have said, OK, you're our guy. You seem to be doing OK. You seem to have a plan; we're going to stick with you. It gives them some consistency. So that also being pointed to as a positive thing.
Richard, look at this stock, though, year-to-date. There clearly are a lot of momentum people here. Maybe some shorter term people who thought this thing was going into the history books. And then it started to look like it was stabilizing. They've jumped on. It's (inaudible) year-to- date. But some people say, hey, OK. It's not a sinking ship anymore but question mark --
(CROSSTALK)
QUEST: It's a classic momentum stock of the old school, this one.
LAKE: Yes, absolutely. And so they didn't fail; they have stabilized and so people sort of jumping on that and riding it higher. Does that mean that chart is going to continue to look that way? Not so sure about that. There are major challenges ahead. And the biggest one is competition.
Listen, they're sort of changing what they're doing; they're moving into other areas. This is a very crowded space, the likes of Amazon out there with -- in the daily deal space, if you're talking about credit card processing, which they're getting into. You've got giants like eBay, newcomers like Square. So there are some real challenges.
And this new CEO, he's got a (inaudible) track records. He's had some real successes, but he's had a couple of failures too. So they've got their work cut out for them. Beware if you are a long-term investor; do your homework before you jump into this one, Richard.
QUEST: Well, yes, talking (inaudible) stay exactly where you are, Maggie. Look at these pictures because Groupon wasn't the only outfit that soared on the Nasdaq. How's this for the sort of launch that companies seem to go for?
(BEGIN VIDEO CLIP)
(MUSIC PLAYING)
QUEST (voice-over): Maggie, that's a daring snowmobile which helped launched the trading day at the IPO of Fox Factory Holdings, the makers of high-performance suspension products. That's a posh (inaudible), high performance suspension products. So that --
(LAUGHTER)
QUEST: Now would you do that?
LAKE: Exactly. If you want people to remember your company, this is one way, right? Richard, you're moving to New York; you know what we love about this city. You never know what's going to happen on the streets of New York City, snowmobiles in August, how about that?
QUEST: I felt my sciatica twinge even as that thing landed. I felt a twinge in me lower lumbago. Maggie Lake, thank you. Up next, we're back to our serious stuff. This time, it's an extraordinary story, this billion-dollar airport, it can be yours for a pittance. There's a little turbulence attached. Why was this airport ever built in the first place? It's QUEST MEANS BUSINESS. We're in Madrid after the break.
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(COMMERCIAL BREAK)
QUEST: It has a runway long enough for the world's biggest planes. There's a control tower, a terminal and parking for hundreds of cars. Now drive about two hours south of Madrid and it really is very clear on the map.
Look at that size and scale. It's Ciudad Real Central Airport. It looks like an airport and you can certainly see the runway and the infrastructure. But it's been removed from pilots' flights charts. You won't find a single plane there. In fact, I suspect there's a cross on the runways to prevent airliners from actually touching down.
Dusty, deserted, it's a metaphor for Spain's ill-fated building boom. It was only a few years ago that scheduled flights dried up. The airport's to be auctioned off with a starting price of $130 million. And the catch: $700 million worth of debt. This is an absolute -- this is an absolute testament to what went wrong, a symbol, much to learn.
Our Madrid correspondent, Al Goodman, joins me now from there.
So first of all, what went wrong with this airport?
And is anyone likely to buy it?
AL GOODMAN, CNN CORRESPONDENT: Hi, Richard. You know, when they were building this airport, one of the first names that was bandied about was the Don Quixote Airport because it's in La Mancha, the region south of Madrid, where Miguel de Cervantes set his famous novel. You can even see some windmills and villages not far from this airport.
Now you can see this airport on the bullet train from Madrid south to Seville. The problem is the bullet train doesn't stop at the airport. That was part of the initial plan and one of the death knells when the politicians who agreed to build this airport decided they weren't going to put the plane there.
So it is a real example, as you say, of the excess of the overbuild during the Spanish boom years. Now in the recession, just another example, 600,000 by estimates, new homes built during that period which have not been sold and there are other white elephant airports as well, one across Spain on the Mediterranean, Richard, that has a giant statue of the politician who ordered it to be built also no planes there.
The auction not expected in September at the earliest. And we don't know yet about who might want to buy it. But it's --
(CROSSTALK)
QUEST: Here's the problem.
GOODMAN: -- you've got some extra cash.
QUEST: No, but here's the problem. You've got Barajas, which of course is a major airport with many runways. And then you're got Barcelona, you've got all these other airports. But surely as air travel grows, somebody might want this as an airport because it does have value. It's got a runway and they're exceptionally expensive.
Or are they actually thinking about abandoning it and putting up houses or -- well, houses, you've got too many of those in Spain. In fact, who -- what would they do with it, Al?
GOODMAN: Well, the court, which has the massive debt they're trying to pay off to savings banks, some which went out of business to the airport workers who were laid off, a whole long list of creditors and debtors, the court is just trying to get something. But there hasn't been really any word on what would happen at that airport.
We know, Richard, that in addition to Barajas, for years there's been talk about a second Madrid airport. Now this one, by bullet train, is only 15 minutes from the capital. But you've had -- you don't have a stop there and you really don't have planning.
And a lot of other Spanish airports of medium and smaller size have also taken severe cutbacks as air travel is down in Spain among domestically. So you really have a mess here on what they might do with this big white elephant, Richard.
QUEST: Al Goodman, who is in Madrid for us tonight.
Jenny Harrison with the weather. I got to New York, there were delays. You were quite right. Those thunderstorms, that rain.
JENNY HARRISON, CNN METEOROLOGIST: I know. There was some torrential amounts of rain actually yesterday Richard across areas of the United States, across the southeast, also Missouri, Kansas and Tennessee. But I'll come on to that in just a moment. But I want to start first of all with conditions across in Europe.
So more thunderstorms here in the last few hours. Not quite as ferocious as they were just a couple of days ago. You can see the storms in the last few hours. Clearing on its way through, bringing in, of course, as well, that slightly better air, much cooler as well. But still those warnings are in place, a huge swath of Europe here under these warnings.
The red areas through the Baltics and the northwest of Italy, Corsica, Sardinia as well, is where we could see some severe winds, all with the threat of tornadoes and some large, damaging hail. This is the front. This is where we have those warnings. It will bring in the cooler air. It'll also bring the rain and those thunderstorms.
But it really is finally making some headway through the weekend. So finally beginning to bring that break you're asking about, actually, Richard, on Tuesday, but look at the temperatures this Thursday. Warsaw, now 37 degrees Celsius, the average is 23. It is actually tied with the records set back in August 1989.
So another very warm one indeed, all those temperatures are 38, which is 100 degrees Fahrenheit. So the heat still remains for the next couple of days. But look at this drop, Belgrade, 37 Friday, 27 by Sunday. In Vienna, we go from 32 on Friday to 27 on Sunday.
So you get the general picture, all because this weather is on its way eastwards, bringing the rain and thunderstorms, but at the same time, bringing in that much cooler air. So another very warm day for some areas on Friday, 32 in Vienna, 29 in Rome and 25 Celsius in Paris.
Now across the United States, we've also had these fires, of course, burning, one in particular, the silver fire out just to the northwest of Palm Springs. This is one they continue to fight. Only 10 percent contained so far, Richard. It's going to stay hot and dry here, very windy over the next few days, 40 square kilometers burned so far.
So again that's another one we'll keep an eye on because the conditions really aren't helping. But as I say, the rain is elsewhere. That has been across central and southeastern areas. So we'll keep an eye on that one as well. Back to you.
QUEST: Thank you very much, Jenny Harrison. And that's QUEST MEANS BUSINESS for tonight. I'm Richard Quest. Whatever you're up to in the hours ahead, I hope it's profitable.
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ATIKA SHUBERT, CNN CORRESPONDENT: From the world famous Pinewood Film Studios near London, welcome to MARKETPLACE EUROPE. I'm Atika Shubert.
Well, the cast list here is impressive, from 007 to Superman and Harry Potter. They've been making movies here for more than 75 years. So it seems like a fitting stage to take a look at the health of the European film industry. The challenges it faces and the creative contribution to Europe's economy. So let's get right to it: lights, camera, action.
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SHUBERT (voice-over): Coming up, casting the cash: the government incentive scheme that's hoping to lure international production to Germany.
And Pinewood Shepperton's CEO (inaudible) a case for more studio space.
IVAN DUNLEAVY, PINEWOOD SHEPPERTON CEO: We feel that there's a very sound economic argument both for our business but also for the film industry here in the U.K. And that the jobs that are created are compelling reasons to want to extend our capacity.
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SHUBERT: Well, Sean Connery walked these steps as Bond in "From Russia with Love." And movies, of course, make big business. And the governments here in Europe are only too aware of the economic benefits they can generate.
Here in the U.K. film tax relief means that last year it was 38 percent lower to make a film here than in the U.S. Well, Isa Soares went to Babelsberg to find out how the German government is getting a slice of the international movie action.
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ISA SOARES, CNN CORRESPONDENT (voice-over): It was under these studio lights that Marlene Dietrich shot to fame in "Blue Angel." It was here, too, that "Metropolis" was built. Its glory days, it seems, are far from over. Today, this hall, one of 16, continues to come to life, playing host to major productions such as "The Three Musketeers" and recently "Hansel and Gretel."
Outside, too, there's more than just bricks and mortar.
UNIDENTIFIED MALE: This back lot was built originally in 1998 for a German film called "Sonnenallee," and it has then been expanded in several steps over different films.
SOARES: Such as?
UNIDENTIFIED MALE: Such as "The Pianist," "Beyond the Sea," so the street served as part of Manhattan and also of Warsaw in World War II. And we also redressed it for "Inglourious Basterds," for example.
SOARES (voice-over): Redressing these streets requires craftsmanship and expertise, for which Babelsberg is renowned. Here, workers toil away at everything from tiling to carpentry, plastering to 3D designs. Then there are the rows upon rows of costumes and props.
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SOARES: This complex stretches over 39 acres. It houses more than a million props. Despite its size, though, it only has 80 permanent workers. During big productions, the numbers swell up to 2,500 workers are brought in. They'll become the masters of the logistics. But they face far bigger challenges.
UNIDENTIFIED MALE: We are basically not able to really attract huge films to come to Germany or to Babelsberg. This is due to the limitations that we have in our subsidy system and on the medium size films, they are quite often independently financed. And this is exactly the area where it still is difficult.
SOARES (voice-over): Set up in 2007, the German Federal Film Fund offers a total 70 million euros in grants a year to film producers. As part of the deal, at least 25 percent of the total production cost must be spent in Germany. But there's a 10 million euro cap on the loan, a hurdle for many big budget films.
UNIDENTIFIED MALE: Yes, we would, of course, like to get rid of the cap. If the fund as such could be raised, let's say, up to 100 million or 120 million, even better, I think that we -- then we wouldn't have these problems anymore and there wouldn't be a fight about the subsidies.
SOARES (voice-over): Regional subsidies coupled with a federal loan help to make Babelsberg more attractive. But in an election year and in the middle of an economic crisis, the fund may have hit its climax.
BERND NEUMANN, GERMANY'S MINISTER FOR CULTURE AND THE MEDIA (through translator): He has to bear in mind the primary aim is not to attract foreign productions but to provide support for German films, German stories and German actors, because we don't want to have only films starring Hollywood.
For this reason, we are spending such a lot of money, of course, we also want to attract international productions. But this is not our main goal. And since resources are limited, I can't really tell you whether we can go far beyond the 10 million euros that can be provided for a film.
SOARES (voice-over): And in an election year, this may be the only storyline possible.
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SHUBERT: That was Isa Soares in Potsdam, Germany.
Well, in the movies, it's all about the stunts; the bigger, the better. And this is the world's only permanently filled and heated underwater stage. You've probably seen it in the Oscar winning movie, "Les Miserables." Well, this is 1.2 million liters of water kept crystal clear by special ultraviolet filtration system. And that means less need for chlorine, so no more eyes for cast and crew.
But all of this takes up space. So the CEO of Pinewood Shepperton told me about his expansion plans both at home and abroad, coming up next.
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SHUBERT: Welcome back to MARKETPLACE EUROPE. Pinewood Studios is, of course, the home to 007. And as a whole, the U.K. film industry supports more than 117,000 jobs and it contributed more than $7 billion to the economy in 2011.
Now 21 out of the 23 James Bond films were made right here. But behind the scenes, the talk is less about "Skyfall" and more about shortfalls, as the studio struggles with the increasing demand for space.
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DUNLEAVY: Pinewood has been around for 80 years now, and it's seen one or two recessions through the cycle before. We concentrate on extending the value of our business and working on additional services to compensate for what is a general economic downturn.
Film makes two major contributions to the U.K. One is cultural by extending the cultural within the U.K. and promoting that cultural internationally.
Economically, it is a very serious part of the creative industries.
SHUBERT: How do you stay competitive? How do you make sure you keep on that cutting edge?
DUNLEAVY: Well, we have to be efficient. We have to provide technology that makes the production process slicker. We have to be on our toes in terms of providing services and providing unique facilities, which, when clustered together, create a competitive offer for our customers, who have the choice of anywhere in the world to go to.
The requirements of our clients and of film productions all the way around the world has gotten bigger over the years, not smaller. Notwithstanding the new technologies that have come along. And so we need to grow to match the demands are putting on us.
SHUBERT: In terms of expanding, not just here, but overseas, I know that there's a number of ventures in China, in Atlanta, for example.
What advantages does it give to Pinewood to be able to have those kind of projects as well?
DUNLEAVY: Well, the Pinewood brand is very well respected within the sector around the world. What we have as a strategy to extend that brand is to look at regions of the world where we're not necessarily competing with Pinewood in the U.K., but where we can offer the services and the efficiencies that I mentioned to film producers, television producers and anyone else that's in the screen based industry.
SHUBERT: I know that there is the film tax relief here in the U.K.
How important is that for the industry?
DUNLEAVY: Well, the U.K. is a high cost-based territory. And so the film tax relief is important in attracting global productions and supporting independent U.K. films. What we've consistently demonstrated as a sector is that the benefit of tax reliefs to the treasury is greater than the relief that is actually given.
The U.K. tax incentive is popular with filmmakers and other European countries have very similar schemes to support film production in their territories. Particular countries have different ambitions, different targets. And so across Europe, it works as a harmonious whole.
SHUBERT: Space is at such a premium here. And yet that's exactly what a lot of films need in order to make the kind -- especially those big blockbuster high budget films.
DUNLEAVY: We would like to build additional capacity here at Pinewood on land that we own. We feel that there's a very sound economic argument both for our business but also for the film industry here in the U.K. and that the jobs that are created are compelling reasons to want to extend our capacity.
SHUBERT: There's a tremendous amount of employment generated by the film industry, Pinewood in particular. But you also have a paid internship program that you just started with the British Film Institute.
Why did you decide to do that and what's the goal?
DUNLEAVY: Well, there are two goals. Firstly, as a company, we feel it is right to support these kind of initiatives and along with that particular program, we have apprenticeship programs and we make available our skilled team to go out and talk to young people who want to enter into the industry.
But more importantly, we are a business that is all about the long term. And we want to make sure that the skills, for which the U.K. is justifiably renowned, are there in the future.
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SHUBERT: That was Pinewood Shepperton's leading man, Ivan Dunleavy. And he has a busy year ahead of him with both the new James Bond movie and the Star Wars film set to be made right here.
With that, it is the end of another episode of MARKETPLACE EUROPE. Join us again next week and thanks for watching.
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