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QUEST MEANS BUSINESS

Prince Philip Taken to Hospital; Portugal Pumping $7 Billion Into Its Banks; BP Fighting to Sell Russian Assets

Aired June 4, 2012 - 14:00   ET

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


RICHARD QUEST, CNN ANCHOR: Prince Philip, the husband of Britain's Queen Elizabeth, in hospital and will miss the rest of the Jubilee celebrations. We have details in just one moment.

It's a capital idea. Portugal is pumping $7 billion dollars into a bank and no easy way out. BP could have a fight on its hands to sell Russian assets.

The start of the new week and I definitely mean business.

Good evening. Prince Philip was taken to hospital a few hours ago as the country and the Commonwealth continues to celebrate Queen Elizabeth's Diamond Jubilee.

Our coverage this evening starts with Max Foster and with Dan Rivers. Dan is outside King Edward VII Hospital in London and to start that, Dan, what happened -- what do we know what happened with Prince Philip and how long he's likely to be in hospital.

DAN RIVERS, CNN SENIOR INTERNATIONAL CORRESPONDENT: All we've received is a statement that was put out by the Press Secretary to the Queen at 5:00 local time, at approximately 2 hours ago, simply saying that he was brought here as a precautionary measure from Windsor Castle after developing a bladder infection which, they say, is being assessed and treated.

(BEGIN VIDEO CLIP)

That "he will remain in a hospital, under observation for a few days ," was the phrase they used. And it went on to finish, "He is understandably disappointed about missing this evening's Diamond Jubilee concert and tomorrow's engagements.

We don't know any more than that officially from Buckingham Palace but, normally, these sorts of things will be treated, we understand, through a course of antibiotics. It would normally be fairly straightforward but as you know, Richard, he's 91 next week. And any illness in someone that old is never straightforward.

And so, that's obviously why they've decided to keeping him under observation. The timing, of course, is terrible.

(END VIDEO CLIP)

But he seems in pretty good form yesterday during the very wet Jubilee pageant down the tens but he was brought in here sometime this afternoon. We don't know exactly what time. And we gathered that the statement was put out at 5:00 after he's already brought in -- he's brought in here.

This is the hospital that all of the Royals use for treatment (INAUDIBLE) a different hospital at Christmas when he had that heart complaint. But this is where he has been before for other ailments. And other members of the Royal Family have been treated here before as well.

QUEST: Dan Rivers outside Edward the VII Hospital in London this evening, watching and on-duty there. Max Foster, our Royal Correspondent, is at Buckingham Palace and joins us.

Max -- I mean, you know, obviously, no 90-year-olds -- you never take anything lightly if they have an infection of any description -- how has it been received at the Palace and by the crowds at the concert.

MAX FOSTER, CNN ROYAL CORRESPONDENT: The Palace, given out that statement, I think, we can be almost certainly sure that all the Royal Family will turn out as planned in the Royal Box far behind me.

This is the concert location. They're all gearing up for the concert that starts half past the hour. The presenter, Chris Evans, briefed the crowds. But when we spoke to them, many of them hadn't heard the new.

"It was a bit of downer," that's what they said.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: I hope he's alright and get better soon.

UNIDENTIFIED FEMALE: I know it's been a great blow because they've always really plan this together. So, yes, I'm really sad. I think, hey, when did it happen.

FOSTER: Sometime this afternoon. It's a little odd to see the Queen though without the Duke, isn't it.

UNIDENTIFIED FEMALE: It's odd. Well, very odd. And I hope she won't feel lonely. She would take courage from the crowd that are here today. Lots of charities are here today either to support -- I hope, you know, she'll be happy about that.

(END VIDEO CLIP)

FOSTER: Of course, he did have a heart operation at Christmas, Richard, but that was an unrelated illness. But, you know, the point is he's 90 years old, he's an elderly man. He was out on that boat all of yesterday.

It must have exhausted him. And, precautionary measures but, you know, is this line in the statement that says, "he's going to be in for a few days" is worrying so many people.

He's going to miss the whole of the Jubilee. The timing couldn't be worse for the Queen. But, of course, the parity is that he's in safe hands.

QUEST: And we'll find out more in the hours ahead. For example, who will be with the Queen in the carriage on the way back and all those -- there's fascinating pieces of Royal information that we follow. Max Foster who is at Buckingham Palace for us this evening.

On to our business agenda. And this time, it's Portugal that is trying to stop Europe's financial system and crisis from blowing a hole in its banking system.

Portugal is to pour more money into its banks to try and get the ratios back up and protect against losses which may or may not come from large scale Greece losses.

On to the library where you can see the details. $7.4 billion injected into three banks -- BPI, CGG and BCB. Now, the Finance Minister, Vitor Gaspar, said that it was important to put the money into the banks so were getting ahead of the curve, if you like. And, crucially, he said, "Doing this would secure the banks' future."

(BEGIN VIDEO CLIP)

VITOR GASPAR, FINANCE MINISTER, PORTUGAL (through translator): Once completed, these operations to increase capital, the banks in question, will be the most capitalized in Europe. And will be in a favorable position to grant credit to the more productive sectors of the Portuguese economy.

(END VIDEO CLIP)

QUEST: The money comes partly from that of the $7.4 billion. And bailout money was given by the EU ECB and IMF. A certain portion of that was reserved for bank recapitalization. And that's where a large part of it will come from.

The banks will also go to the market and raise several hundred million in their own right through right issues. It will be interesting to see if they follow President Draghi of the ECB's advice, that "if you're bailing out a bank, do it big and bold."

As for the Capital Ratio Rules, nine percent is what they are aiming for across Europe. Bank space deadline to bring the strength up to the EBA's standards of nine percent -- never mind what the bozzle (ph) three wants, Europeans are wanting even in some cases -- the deadline is the end of the month. BPI says, this cash injection will help them meet that.

Portugal's bank is -- banks are suffering from recession at home. They've also got loans going bad at a record rate. And on the plus side, their deposits have increased.

So, we've not seen anything like the withdrawals from the Portuguese banking system but we have seen, for example, in Greece or in the last few weeks, and perhaps even in Spain.

And for Portugal, the Bank of Portugal says, "The debt situation will intensify in 2012." And that's probably a clear reference to what of course is happening in Greece.

Experts at Morgan Stanley have been keeping an eye on Europe's deepening grosses. They say, "The likelihood over Euro's own breakup for parties growing, 35 percent." Ron Hart is the Managing Director of Wealth Management at Morgan Stanley.

Ron, look, when you say 35 percent -- I think of that as a third. It's less than a half. It's more than a quarter. But I'm still not sure if you think it's going to happen.

RON HART, WEALTH AND MANAGEMENT MANAGING DIRECTOR, MORGAN STANLEY SMITH BARNEY: This is uncharted waters. It's hard to pro forma situations that never happened in the world economy before.

So, at best is a guess. A more likely scenario is a 40 percent chance that we muddle through, they call it "stagger on", which is some derivation of all these possibilities and physical policy included. And that it holds together in some form of format.

But we put our best people together, they thought it through. You're trying to coordinate cultures in countries and physical policies, I mean -- it's hard to get people agree on where to go to dinner, you know. Much less, how to spend money worldwide.

So, it's a tough situation of which it is very difficult for anyone to actually tell you with a straight face, "I know what's going to happen." But that's our best guess.

QUEST: And, you, perhaps -- and I don't say this in a heartless fashion, but you are, perhaps, one of those who says, "Well, look, if banks have to go bust, so be it."

HART: Well, everybody has their philosophy. You got the Keynesian policy that you stimulate businesses during bad times and then you run up a balance budget during good times.

The problem with Keynesian Economics historically is they don't run a balance budget during good times and they don't have the powder to stimulate during bad times.

They Austrian School of Economics is more of a laissez-faire form of economics. When you try to coordinate very difficult things worldwide, it's like gift-wrapping an octopus, I call it. You're trying to coordinate a lot of different situations of economic understanding, and there's also the political overtones.

Every country has their own political situation. The most important date of holding this thing together is June 17th during the Greek elections. I thought, it will be very important in terms of the direction of which this thing may well take off.

QUEST: All right, but do you think, whether its countries or particularly banks, that we should be prepared to say, you know, small savers are protected by deposit insurance so, Mr. and Mrs. Joe Smith are OK. And as for the rest, let the banks go if that's what it takes.

HART: I don't think we're prepared to say that. We're trying to say that there's been FDIC equivalent in the European Union and their countries. That should be a big part of what happens going forward, so there's the confidence that money is there in the banks when you need it.

But each country is different. And you have to understand the culture of each country and the physical world of each country. What drove Spain's problem didn't cause Greece's problems.

Greeks slowed down the economy. They had tremendous spending. And in Spain, you had flotation (ph) of bank real estate loans. So, each country is a little bit different. So, one solution that fits all is really not the way that always works in these situations.

QUEST: And with June the 17th being almost upon us, Ron, are you prepared to say, "Greece in or out." Never mind the Union. Let's just stick with the Eurozone for the moment, in or out the Eurozone by this time next year.

HART: We're seeing 35 percent. Well, we also did, too, Richard, with our forecast. We took the probability down to 12-18 months from when we will know. We said five years before.

We were saying, there's 25 percent chance that within five years, Greece or some other country like Greece, one of the PIGS as they're called, leaves the EU, we're leaving that timeframe to a narrow universe now between 12 and 18 months.

And we'll know something pretty soon. June 17th could be a very important day. You saw what happened to France. The country sided more with the stimulus side of the equation, spent more by the government, taken more debt by the government, stimulating the economy.

Look, you have all forms of economic theories here. You also have in play helper issues and anthropology issues and world history issues, et cetera. So, it's very difficult to tell what's going to happen in these situations.

QUEST: I'll be in Athens on June the 17th and the 18th covering out the election. We hope to talk to you to give us some analyses from your side of the logic when we got the results. So, I appreciate you're joining me today.

One note that just come in in the last few minutes. SMP now says, it's put out an alert. Take a one in three chance, it believes, a one in three chance of Greece leaving the Eurozone. That's what they say.

The stock market in London was closed as part of the Diamond Jubilee celebration. And the Dax and the Zurich SMI both fell more than one percent. Spain finished up almost three percent. Weerden (ph) Spain at 2.8 percent.

Mariano Rajoy, this Prime Minister truly supports behind tighter centralized controls over European government powers to set budgets, starting the zone at a fiscal compact a bit large that played out well for Spain on the bond market.

The yield down to 6.4 percent. Narrowed the spread between Spanish and bonds which were slightly -- borrowing cost falls, they fell slightly. And Italy down to 5.6 percent.

You are up-to-date on what was a busy day. Another round in BP's battle with its Russian partners. This is fascinating. It's got everything -- money, politics, Kremlinologists. What's going on with BP, TNK-BP, Bob. Up tonight.

(COMMERCIAL BREAK)

BP says, it's confident it can still sell its stake in the Russian joint venture TNK-BP to whomsoever it chooses to. BP's Russian partner in the venture has threatened to block a salesman outsider.

Now, a source close to the investment group, AAR, which is the owners of Willoughby, told the FT that the Sales Agreement -- you couldn't write this. You couldn't make it up. The Sales Agreement prevents BP disclosing commercial data to third parties without its consent.

Now, nobody's going to buy, of course, TNK-BP or their shares without that sort of information. So, tonight, BP says there's nothing stopping it talking to instant parties and AAR accounts unreasonably withhold information necessary.

The business itself has earned billions for BP with some running battle of who's in charge. Estimates of what BP could get, with 50 percent, it goes as high as $30 billion.

Which raises interesting questions in its own light. Over what exactly BP would do with that amount of money. Where will they invest it. Jim Boulden is with me and he's been following twists and turns of BP's involvement.

JIM BOULDEN, CNN CORRESPONDENT: For seven years, I think we've been following BP's involvements. You know, this is of course, the company that Bob Dudley used to run and got pushed out.

QUEST: They got more than pushed out. They got run out on the road. They had to leave the country in the middle of the night.

BOULDEN: Those Russian soap opera continues and then the CEO, of course, quit last week. And so, I think, BP has said, "We've made a lot of money from this. It's time to get out."

The question is, and I can't answer it tonight, "Who is this interested party." The thought is it's a Russian staple old company, the Gazprom or Rusna. Then that would make it even more interesting if that sale were to go ahead.

QUEST: OK. Couple of quick questions. Firstly, is BP being pushed or they jumped in.

BOULDEN: I think, they've had enough. I think they've had enough. It's been too complicated, too difficult even though it hasn't been very profitable. And Russia, like a lot of countries, have decided they want to take back control, of their natural resources.

And BP, as a private company, doesn't play well in Russia.

QUEST: Is AAR players to buy the 50 percent they don't already own.

BOULDEN: They could be.

QUEST: After all, they didn't want to do anything like that when BP wanted to sell out so they could have the Rusna deal.

BOULDEN: Yes, exactly. And that's what's so interesting. When they couldn't get the deal with Rusna which just died down because the complications of this -- because of the complications of that contract. So, BP says, "OK, forget it. We're going to sell this now."

And then, I think, they're going to use some of that money to go back into Russia. You cannot not be in Russia.

QUEST: OK. So, can we see a scenario -- and they're all Russians, so who knows what they're saying to each other behind closed doors, will AAR get into bed with Rusna or Gazprom or -- in some form to do this deal. What I am really asking is, why is AAR cutting up difficult with all this stuff about material disclosure and confidential information.

BOULDEN: Well, according to BP, we got those statements so we can show you more of that statement tonight. They simply cannot do that. They simply cannot withhold information for a sale.

But if they were to try to do that and they'd attempt to do that, the would be stopping the State Oil Company of Russia from getting this information. So, you can see there where we spent most of the day trying to get this out of BP and they said, they cannot unreasonably withhold the information necessary for the sale.

TEXT: "AAR cannot unreasonably withhold information necessary for the sale, neither party has a veto over the sale of the other's shareholding." David Nicholas, BP Spokesperson.

Now, I put six questions to AAR this afternoon in an email and have not gotten a response yet. But that's part of it. Are they reading this contract the same way BP is. Clearly, they are not.

The BP, I think, has been very clear here. That they can sell this to whomever they like, whenever they like. The question will be the price.

QUEST: AAR, answer your emails from Jim Boulden, please, by tomorrow. Well, if you don't try -- Jim, stay with me on this.

Now, rather than breaking up a partnership, the talk is about working together.

(BEGIN VIDEO CLIP)

There's a summit between the European Union and Russia today, the President Vladimir Putin's first touch meeting since he returned to the Kremlin as President.

He promised to strengthen ties with Europe, Russia's largest trading partner. Speaking after the talks at St. Petersburg, President Putin and European Council President Herman Van Rompuy, said they were optimistic about the future of the Eurozone.

HERMAN VAN ROMPUY, PRESIDENT, EUROPEAN COUNCIL: Let me be clear, there is no way back for Europe. There is only the way ahead towards more integration. We want, by the way, Greece to stay in the Eurozone while respecting its commitments.

VLADIMIR PUTIN, PRESIDENT, RUSSIA: We hope that our colleagues in the European Union will be able to overcome present difficulties. Judging by what we have heard today and yesterday, out European colleagues are very determined.

They have a very professional approach and I'm fully confident in saying that. And I can say that these are not futile words. This is a well-balanced policy.

(END VIDEO CLIP)

QUEST: And one of the notable aspects of the Russian economy has been the way it's pulled in money as a result of higher oil prices. Slightly less now, the price is down.

But even so, Russia's $10 billion-sovereign- wealth fund is now hoping to strengthen its international ties. It has only started last year. It is called the Russian Direct Investment Fund and it aims to focus on domestic opportunities.

Kirill Dmitriev is the Chief Executive. Two all new reasons (ph) they didn't tell me about the country's sovereign funds. When you look at sovereign funds, everyone's in on the action.

KIRILL DMITRIEV, CEO, RUSSIAN DIRECT INVESTMENT FUND: Eighty percent of the funds will be invested in Russia. And up to 20 percent can be invested outside of Russia.

And with this, Russia has a big opportunity because of the six largest economy in the world, it has third largest reserves in the world. And whereas now, many countries are facing the issues of high debt and low growth, Russia's situation is totally the opposite.

QUEST: You're not on your own. Whether it's the Gulf States, the Singaporeans, whether it's the Chinese, whether it's the Norwegians -- so, is it getting more difficult to find large-scale value investments.

DMITRIEV: Richard, actually, we think of it much more of a partnership because, for example, we set up a fund with Chinese Investment Corporation which is a Russia-China fund, investing together --

QUEST: Investing in Russia still has fundamental problems -- transparency, corruption in some cases, open markets. How do you convince me that, actually, it's not just the Wild West.

DMITRIEV: Well, I think, Russian government is very much aware of those issues and the focus is now to solve them in a very specific timeframe.

So, Mr. Putin, for example, told that Russia needs to move from 120th place when it is doing business to 20th place in a very short time --

QUEST: Yes, but President Medvedev, when he was there, did introduce that entire program of improved corporate governance but it has not really gone anywhere.

DMITRIEV: Yes. Well, let me tell you this. Very few people understand -- not understand some things about Russia. Middle class in Russia tripled in the last five years.

QUEST: Right.

DMITRIEV: That's exciting. Ikea here has the highest sales per square foot in Russia than any other markets in the world.

QUEST: That is exciting but only if there isn't the feeling that it's a rate market or whether it's the BP investment or holocaust -- whatever it might be. You know these better than I do.

But it is a feeling that it's not a fair market. It doesn't matter how big your middle class gets.

DMITRIEV: Well, and I think, Russian market is getting fairer. And there are many examples that we'll create together with some of the largest investors in the world that would make them comfortable about investing in Russia.

For example, we are now working on a hill scale deal with one of the number one fund investing hill scale worldwide. Why do they invest in Russia and that's going to be their first deal in Russia. Because, I understand that hill scale market is going to grow.

And the rules of the game are being more stable. And I've been investing in Russia for the last 10 years, never had an issue with the government even though I didn't have a government fund. Our returns fold a hundred percent a year.

So, I think, we'll prove by our hard work that you can make very good investments in Russia and, hopefully, you know, that will become clear in the next couple of years.

QUEST: Live discussion on the question of Russia investments and we'll follow BP and TNK-BP.

Now, for today's "Currency Conundrum".

(BEGIN VIDEO CLIP)

More Monopoly Money is printed each year than real U.S. Dollars. Is that a true or false statement. More Monopoly than U.S. Dollars, true or false. The answer, later in the program.

As for the real rates, London was out for the Jubilee so, obviously, currency tradings slightly led -- London is the largest market. The Euro strengthened more than half of it against the Dollar on hopes B.U. leaders keep Eurozone in battle.

Those are the rates. This is the break.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

Taking saturation points in its key markets, Facebook could be on the point of opening up to the younger generation. The "Wall Street Journal" says, "Facebook is looking at the idea of membership of under 13 as long as they're subject to parental supervision."

Now, you've got to be over 13 although younger users can get password if they lie about their age. Facebook says, "The lower age limit may never happen," as Maggie Lake now reports. In the tech world, that's often the case.

(BEGIN VIDEO TAPE)

MAGGIE LAKE, CNN BUSINESS CORRESPONDENT (voice-over): From the world's very first Smart Phone in "Get Smart" to "Zoolander's" Mini Mobile, history is littered with gadgets that, well, never quite made it.

But it doesn't seem to bother the whiz kids of Silicon Valley. Execs at Facebook, Google and Apple are all rumored to be working on the next great must-have product. The very latest in "Gadget Gossip".

PAUL LAMONICA, EDITOR AT LARGE, CNNMONEY.COM: Now, that after Facebook has gone public, everyone wants to know what they're going to do with that cash that they raise, so speculation that, maybe, they will have their own Smart Phone to rival Apple, I would love to see them come out with something that they could call the "F Phone".

LAKE: A phone might help address Facebook's mobile advertising problem.

MARK ZUCKERBERG, PRESIDENT AND CEO, FACEBOOK: But it's going to be tough. It's not easy for a software company to make hardware.

LAKE: Plus, "After its botched IPO, Facebook may have lost some of its cred," says comedian and trend watcher, Steve Hofstetter.

STEVE HOFSTETTER, COMEDIAN AND SOCIAL MEDIA COMMENTATOR: The problem, of course, is once you buy the phone, it auto-dials the FCC. And, yes, the day after buy it, it drops 20 percent in value.

LAKE: Apparently not worried about the threat of a Facebook phone, Apple CEO, Tim Cook, is hinting again that they're ready to tackle T.V.

TIM COOK, CEO, APPLE: This is an area of intense interest for us.

LAMONICA: It would be amusing to see people lining up outside of Apple Store. There's one thing to go into an Apple Store and then walk out with a tiny little box and there's a phone or an iPad in it. And I'm not so sure you'd want to see people lugging, you know, big flat screen T.V.s.

LAKE: And then there's Google. The Search giant has already taken on Apple on the phone space. Now, they supposedly have their sights set on Tab.

HOFSTETTER: I really wanted the Google Tablet because I wanted just the irony of being able to use the Google Tablet and have the Google browser, go to Google and search for the definition of their terminating (ph) process. Because they're doing too much.

LAKE: Government regulators will be watching but finicky consumers will ultimately decide whether a new generation of gadgets can stand the test of time. Maggie Lake, CNN New York.

(END VIDEOTAPE)

QUEST: Coming up in a moment, a message for York leaders from George Soros, "You are running out of time." After the break.

(COMMERCIAL BREAK)

QUEST: Hello, I'm Richard Quest. More QUEST MEANS BUSINESS in a moment. This is CNN, and on this network, the news always comes first.

Britain's Prince Philip is to miss the rest of Queen Elizabeth's Diamond Jubilee celebrations. Buckingham Palace says the Duke of Edinburgh has gone to hospital for a treatment for a bladder infection and is expected to stay there under observation for a few days. The Queen's husband will be 91 years old next week.

Canadian authorities say a suspected killer has been arrested in Germany. Luka Magnotta was found at a Berlin Internet cafe. Montreal police say that he's accused of killing and dismembering a university student and mailing parts of the body to Canadian politicians.

Officials have told CNN the pilot of the Dana Air jet that crashed in Lagos in Nigeria on Sunday radioed that the plane was having trouble. The McDonnell-Douglas MD-83 went down in a crowded area of the city. It killed all 153 people on board and at least 10 people on the ground. The crews are still working to recover bodies.

The government of Argentina has told CNN in the last half hour it is taking legal action against companies exploring for oil in the waters around the Falkland Islands. Argentina says Falkland Oil and Gas and four other companies are operating illegally on what it calls Argentina's continental platform.

Argentina claims sovereignty over the islands, which it calls the Malvinas and unsuccessfully fought to take them back from the United Kingdom 20 years ago.

The former Societe Generale trader Jerome Kerviel is appealing against his conviction for breach of trust and forgery. Kerviel was sentenced in 2010 after the bank said it had uncovered a string of unauthorized trades. Societe Generale said his actions led to losses of more than $6 billion. Kerviel says the bank was aware of his trades and it had tampered with the evidence.

(MUSIC PLAYING)

QUEST: Let's start with the big board in New York and how that's trading at this hour. Down 13 points, which is not bad, considering the sort of May that we had and the havoc of June. It's looking a little bit dubious, though. But we are 4,105. There has been all sorts of developments concerning the Eurozone in the last few hours.

Finance ministers from the G-7 countries are expected to talk about the debt crisis as they hold a teleconference on Tuesday. Now if the financier George Soros is right, they'd better have some bright ideas. Mr. Soros says Europe has just three months to fix this crisis. Maggie Lake is in New York.

Good Lord, Maggie, looking at those (inaudible), is that really the sort of dark clouds of the day that you're suffering from? Listen, let's start with George Soros and what he has to say, well, (inaudible). George Soros says -- and his first substantial point is, "there is a bubble involved, after all, it's not a financial but a political bubble and it relates to the political evolution of the European Union," Maggie.

MAGGIE LAKE, CNN CORRESPONDENT: Yes, Richard, I think this is a really important point. And this is getting so much attention because in some ways George Soros is bluntly saying what a lot of people have been thinking and fearing. And the political bubble is one where that basically, first of all, it's in Germany's court, he says.

And he's probably right about that. And he's making the point that when the euro experiment was launched, the political leadership was for further integration. But that after '08 and '09 that that changed and the political leadership now is all about the status quo and maintaining the status quo. That's not going to solve the problem they face. And that has a lot to do with what we're dealing with today.

QUEST: OK. I mean, I read his speech, and it's very complicated in terms of comparing the law of economics with the science law. And he says we made some fundamental mistakes. But he does also put the point the real economy of the Eurozone is declining while Germany is still booming. And that seems to me to be the core of it, doesn't it? That Germany is on its own, the U.S. is growing, other places are growing. The Eurozone's declining.

LAKE: And that's part of the problem, because Germany is booming, he points out it's hard for the average German citizen to see what the problem is, to see the sort of deflationary debt spiral that some of the periphery economies seem to be falling into.

And if you can't feel that sense of urgency that sort of economic decline, (inaudible) not going to be willing to cough up money, your tax money, to pay for part of the problem. That doesn't mean they won't feel it at some point. I don't think there's anybody who thinks Germany is going to thrive while the rest of Europe falls apart. But sort of getting that hard sell through to the taxpayers now isn't working.

QUEST: OK. So we know the situation is grim, a bit like the clouds above your head that look like they're going to pour like it was in London yesterday. But this is dramatic. "In my judgment, the authorities have a three-months' window" to do it or to correct their mistakes. Three months, Maggie, is what he says. No wonder Tim Geithner in the U.S. and the U.S. politicians are worried.

LAKE: Yes. Richard, and I don't even know if they have three months. When you talk to analysts, the way the market feels, what they're seeing in the banking system and in Spain, I think George Soros might be putting a line in the sand, but he's being generous. But certainly wanting to get the point across that there is urgency after two years of talk.

We know it's hard for 17 countries to get together and come up with a solution, but they are clearly running out of time, and Soros said very clearly this is not a fiscal problem, this is a banking problem, and that is very different. You don't have the same sort of time to deal with it. Had they dealt with it two years ago, maybe, but right now they're out of time. They need to come up with a solution.

QUEST: Maggie Lake is in New York for us this evening with that perspective. The three months' window.

The governor of Mexico's central bank, on a similar theme, says Europe needs a lender of last resort to fix its economic crisis. That's somebody who can bail out any bank, any time, any place, anywhere. Agustin Carstens told CNN's Nick Parker it's time for tighter controls on European banks.

(BEGIN VIDEO CLIP)

AGUSTIN CARSTENS, GOVERNOR, MEXICAN CENTRAL BANK: I think that we have found out that Europe has (inaudible) and needs a, to some extent, a lender of last resort. They have moved in that regard in establishing the (inaudible) mechanisms. But they also need the deposit insurance upon European deposit insurance.

I think they should move in that direction and I also think that it would be appropriate to do what Mr. Draghi's calling for, to have an integrated (inaudible) scheme at the European level, together with a resolution mechanism.

NICK PARKER, CNN CORRESPONDENT: So just to be clear, that was obviously Spain's position, that the ECB should become a lender of last resort. That's something you would support?

CARSTENS: Well, I mean, I don't -- I'm not calling for it to happen in this particular stage. But this crisis have told us that instances of that sort are necessary. And right now through this stabilization mechanisms, the gap is being filled. But I think that in the medium- and short-term, I would say more institutional arrangements should be in place.

(END VIDEO CLIP)

QUEST: Agustin Carstens talking to Nick Parker.

In a moment, more Diamond Jubilee, as Britain made the most of a long weekend and thousands are settling in to a gala concert (inaudible) Buckingham Palace (inaudible).

(MUSIC PLAYING)

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QUEST: The second day of jubilee celebration's in full swing, and not just in the U.K. Thousands of beacons are being lit across the commonwealth. The Queen will light the last one tonight at a gala concert in front of Buckingham Palace. CNN's Atika Shubert is live from London's Trafalgar Square and joins me now.

From where you are, you will have just about hear the music of the concert.

ATIKA SHUBERT, CNN CORRESPONDENT: That's right. We should just about be able to hear it, but there are so many people in between us and the concert I think it would be impossible for us to see it. There are literally thousands of people filling up the mall right now. And of course, the main event will be that beacon lighting at the end, when the national beacon will be lit. We've already seen some beacons around the world being lit.

The first was in Tonga, New Zealand and Australia, and now we understand also in South Africa and Kenya. And Kenya's particularly poignant, because that, of course, is where the Queen was told of her father's death, George VI, and was told that she was now a monarch. So this is the beacon lighting we're seeing across the world, will culminate at 10:30 when the Queen lights the national beacon here.

QUEST: And tomorrow, of course, we will be in Trafalgar Square for the celebrations of the thanksgiving and like. Atika Shubert in Trafalgar Square tonight. What better way to celebrate the Diamond Jubilee than with an old-fashioned picnic.

Now the Queen invited 10,000 guests to her home at Buckingham Palace today. The picnic hampers were filled with goodies prepared by the chef Heston Blumenthal. There was crumble, fool and Eton mess. The only thing perhaps missing was jelly. And when it comes to jelly, we met people who really knew their jellies and also played a bit of royal crazy golf.

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QUEST: My well-known loathing of golf doesn't stretch to when it's crazy golf, and when the course is built and designed to look like cakes. You could always enjoy a cake. It's the afternoon. Sam is here.

Sam, what's your role in all of this?

SAM BOMPAS, BOMPAS AND PARR: Well, I'm one-half of Bompas and Parr, and we've been working hard to realize our vision of London landmarks made of cake for the high tea on the roof of (inaudible). I think there's something wonderful, joyous and mostly compelling about cake. All the best-rated golf courses have a theme. None so far have had a cake theme.

QUEST: This is my moment of triumph, or not, as the "cake" may be.

(LAUGHTER)

QUEST: Yes! In for 10. Right? So what do I have to do here?

BOMPAS: This one you've got to get up the ramp and all circle around a representation of Wren's (ph) masterpiece, which is the actual inspiration for the wedding cake that's enjoyed all over the world today.

QUEST: All right. So it's from here and it's straight into the -- literally, so to speak, into the cake hole.

BOMPAS: Yes.

QUEST: One. Two.

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QUEST: (Inaudible). Three. Four.

BOMPAS: Ah, there you go. (Inaudible).

QUEST: You started off in the business of jellies and you're still making jellies.

BOMPAS: Once we got (inaudible) making jellies and (inaudible) food market, they rejected us immediately (inaudible) ridiculous idea. But we found that those actually are real (inaudible) for jellies and especially (inaudible) jellies at the time. The last year for the royal wedding, we made jellies for Buckingham Palace, and they sold out literally in about 10 minutes.

QUEST: Where does this love of jellies come from?

BOMPAS: OK, there's a certain joy in jellies. If you smack it dead on in the middle of (inaudible). (Inaudible).

QUEST: I think this is known as being in the rough.

(LAUGHTER)

QUEST: Oh, look, it just happened to fall onto the -- oh. What a shot.

BOMPAS: Oh, what a shot.

QUEST: Oh, what a shot.

(LAUGHTER)

QUEST: Oh.

BOMPAS: The most important thing for us people (inaudible).

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BOMPAS: A lot of (inaudible).

QUEST: I can't even cheat.

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QUEST: Enough hijinks. Time for high tea. Before the Jubilee, with the economy wobbly, let's enjoy some jelly -- Richard Quest, CNN, London.

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QUEST (voice-over): The answer to our "Currency Conundrum", I asked you, true or false, Monopoly money is printed each year, more Monopoly money than real money, by the U.S. Treasury. It's true. Parker Brothers, the makers of the board game, says it prints $30 billion in Monopoly money. Last year the U.S. Bureau of Engraving printed 974 million real dollars, more Monopoly than the real stuff.

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QUEST: So this was the picture -- or the painting -- (inaudible) by Canaletto that inspired much of the Jubilee pageant yesterday. How does it compare from -- you can see St. Paul's Cathedral, and that's what it looked like actually yesterday on the river. x

Let's go backwards and forwards between the two again. That's the original picture or painting, and that's what it looked like yesterday. You can still see St. Paul's and the monument. Extraordinary pictures there.

So the Diamond Jubilee concert is getting away -- I'm (inaudible) for the Canaletto. The Diamond Jubilee is getting underway at the concert. What the weather will be like, the meteorologist Jennifer Delgado is with us at the CNN World Weather Center.

The weather was shocking yesterday and it was a warm-spirited day and what's tonight and tomorrow like?

JENNIFER DELGADO, AMS METEOROLOGIST: You know, it was bad for even on British standards, yesterday's weather. And the good news is the weather is improving. Earlier, we had a live shot with Atika Shubert, and you saw the glimpse of the sunshine back there. And right now, weather conditions being reported for Heathrow as well as for London city, actually showing you just a few clouds around, some sunshine. 0020

The wind's from the north, but it is rather cool for this time of year. Actually, temperatures should be a little bit closer to about 19 degrees. So what is going to happen with the concert? I know it's underway right now, but will it remain dry? Well, the good news is it is going to remain dry.

As I show you on the satellite imagery, I notice for yourself, we really just have a few clouds around the bulk of the cloud cover and the rain is all the way over towards areas including Ireland. It's going to stay there, and then by tomorrow, we'll start to see some more rain working in. I know that's not good because certainly have a very big event tomorrow with the flyover.

But as we take you through, tomorrow morning at 6:00 am, notice for yourself, you're starting to see some rain working into the southwest. Well, how is that going to affect the midday hour? Well, as we go in through for the main ceremonial day on Tuesday and very close to the time of the flyover, this is at 3:16, I notice wet conditions will return. 0020

Now it's not going to be as heavy as what it was, say, on Sunday, but the reality is you still need visibility to be about 5 kilometers to actually get that flyover with the RAF. So again, we're certainly going to be watching the weather very closely. And just to give you a better way to plan out your day for your Tuesday morning, temperature, 10 degrees. 0020

And then notice, as we go into the midday as well as into the afternoon hours, those rain chances will increase dramatically, Richard. So it wasn't a very nice day out there, but overall, the activities were still a good time, right?

QUEST: You're just being polite.

DELGADO: I am.

QUEST: You just don't want to give --

DELGADO: It happens very rarely.

QUEST: (Inaudible) -- you just don't want to give me the really bad news. It is going to bucket down on me tomorrow as it did yesterday.

DELGADO: It's not going to be as bad as yesterday. Of course, we saw the Philharmonic, and they were just drenched out there. You really felt for them. But it's not going to be as bad as yesterday, but it's still going to be cool and wet.

QUEST: The rest of Europe enjoying anything better than we've got in time to go somewhere else?

DELGADO: Oh, yes, southern Europe, temperatures are much nicer there, and we're going to see temperatures in the 20s as well into the 30s. And that's what's happening weather-wise. And we can't forget about Venus.

Venus is going to be passing by in front of the sun starting at 3:09 Pacific time. Now this only happens once every 120 years. It arrives in pairs. Last time was in 2004. You're going to have to do your own time, but it's going to happen into the overnight hours as well as into the morning for you. So look --

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QUEST: Hang on, hang on, hang on. It's 3:09 Pacific time, in the morning or the evening?

DELGADO: It's going to be in your morning. Wait a minute.

QUEST: Right.

DELGADO: Is that right? Yes, that's right.

QUEST: What --

DELGADO: Oh, man, you want me to do math live on the air right now? (Inaudible). Let's go back.

QUEST: Local. What time Pacific? All right, we'll work it out.

DELGADO: We're at 6:09, 3:09 for California. So it would be roughly 6:00 for you, right?

Oh, I'm on Asia time. I'm 12 hours ahead.

(LAUGHTER)

DELGADO: Let's just cut this clip out. `Bye.

QUEST: All I know is we've got a long time to wait for it to happen again. The big board. Let's go (inaudible) big board and that losing streak is continuing on the markets in New York, the Dow down just off 14 points, hardly anything to get too excited about.

The stock market in London was closed for the Diamond Jubilee, but I do need to show you what happened in other major markets. The DAX was off 1 percent. The CAC 40 was just up a little bit. But the big -- the big interesting news came in Spain, where Rajoy made comments and the market actually rallied, the best part of 3 percent.

There may be some optimism that the worst of what might be happening or might be thought of will not actually happen.

When we come back in a moment, a "Profitable Moment" is (inaudible) QUEST MEANS BUSINESS (inaudible).

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QUEST: Tonight's "Profitable Moment," and for that, we go to Russia. The fiasco between BP and its Russian partners over there, joint venture TNKBP. I've no doubt that some day it will make for a spellbinding movie script.

If you think about it, it's got all the ingredients of a corporate drama of our age. You've got the troubled corporate giant, BP, wounded but not hobbled completely by the Gulf of Mexico crisis. Needing to raise cash, but perhaps no more. The belligerent billionaires at AAR, the backstopping and blockbuster deals gone sour.

The latest developments are where it gets interesting. BP must surely want to grab the money and run as fast as possible. AAR's saying not so fast. It's already torpedoed BP's deal once, and now it seems this marriage of inconvenience is going to get even more bitter. Ha! There will be plenty more fireworks before the credits roll on this boardroom drama.

And that is QUEST MEANS BUSINESS for tonight. I'm Richard Quest in London. Whatever you're up to in the hours ahead, I do hope it's profitable. The news headlines are next.

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Britain's Prince Philip is to miss the rest of Queen Elizabeth's Diamond Jubilee celebrations. Buckingham Palace says the Queen's husband has gone to hospital for treatment for a bladder infection and is expected to stay under observation for a few days. The prince is 90.

International manhunt has ended in Germany. Canadian authorities searching for Luka Magnotta say he's been arrested at a Berlin Internet cafe. Montreal police say Magnotta is accused of killing and dismembering a Chinese university student and then mailing parts of his body to Canadian politicians.

Officials have told CNN the pilot of the Dana Air jet that crashed in Lagos, Nigeria, on Sunday radioed that the plane was in trouble. The MD-83 went down in a crowded area of the city. It killed all 153 people on board and at least 10 on the ground. Crews are still working to recover bodies.

The government of Argentina has told CNN it is suing oil companies exploring in waters around the Falkland Islands. Falkland Oil and Gas and four other operates are acting illegally according to Argentina. Argentina claims sovereignty over the islands, the islands which it calls the Malvinas.

You are up to date. This is CNN. Now to New York and "AMANPOUR," live.

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