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QUEST MEANS BUSINESS
Possible Breakthrough in Ukraine; Truce Shattered in Kiev; Day of Mourning; Ukraine's Future; Ukraine Sanctions; Ukrainian Economic Instability; Serbian Economy; Facebook Buys WhatsApp; Dow Up; Facebook's Big Buy
Aired February 20, 2014 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(NEW YORK STOCK EXCHANGE CLOSING BELL)
MAGGIE LAKE, HOST: It's the closing bell on Wall Street, US stock markets closed higher for the fourth time in five days. It's Thursday, the 20th of February.
Ukraine's bloodiest day, more than 70 are killed in clashes between protesters and police. Europe's foreign ministers describe their horror at how the crisis is unfolding and react with sanctions.
Plus, Facebook spends a huge amount of money on a messaging start-up.
I'm Maggie Lake. This is QUEST MEANS BUSINESS.
Good evening. A possible breakthrough in Kiev tonight. The Ukrainian government has agreed to hold early elections and form a new government within ten days. Constitutional reform will come this summer. That's according to a statement released by Polish prime minister Donald Tusk.
Poland's foreign minister has been part of the ongoing talks with President Viktor Yanukovych, opposition leaders, and EU officials. The agreement comes after the deadliest day Ukraine has seen in decades. Earlier, gunfire erupted in Independence Square. The opposition says government snipers fired into the crowds, killing 100 people.
Demonstrators desperately carried the wounded away from the clashes. Ukrainian officials admit that police used firearms but say it was only for protection. The government reports three police officers died in the clashes and say several others were injured and held hostage by protesters.
The EU today slapped sanctions on those responsible for the violence. Within the past hour, the Ukrainian parliament has declared Wednesday's so- called anti-terrorist operation illegal. The motion ordered security forces to return to their stations.
Phil Black is live in Kiev following all the developments for us, and Phil, this has been such a fluid situation all day. Now we are hearing there is yet another at least hope for a breakthrough. How is it being received by the protesters?
PHIL BLACK, CNN INTERNATIONAL CORRESPONDENT: I think it'll be received cynically for the moment, Maggie. Those talks are still underway between President Yanukovych and the three European foreign ministers.
And it appears that the Polish prime minister has perhaps let the cat out of the bag a little bit earlier, but we're linked to wait until these talks finish and we hear precisely what language they use, the nature of the commitment, precisely what President Yanukovych has agreed to do.
Because these things that we're hearing about, the idea of constitutional change, early elections, both perhaps presidential and parliamentary, these are the things that the people in this square have been screaming for, to some degree fighting for, for something going on three months now.
And up until now, President Yanukovych hasn't gone for any of those suggestions, has shown absolutely no willingness. In fact, as we know, what we've seen particularly this week is a dramatic escalation in the violence that has been used to attempt to suppress some of the protest crowd at least.
So, we'll just need to wait to see precisely what happens, what sort of language Yanukovych uses, and to what extent he is genuinely committing to this idea of changing the constitution and potentially throwing the future of his government back to the Ukrainian people to decide precisely who they would like to lead this country and what direction they want the country to travel in, Maggie.
LAKE: You're right, it would be a huge change, if it were to be the case. Phil, we hear that music that we have heard so often playing behind you, I'm assuming some sort of national anthem or something coming from the protesters' camp.
About the protesters, themselves, we have seen violence on both parts, and much blame being spread around. If there is an agreement, if it does hold true and there are going to be elections, is there a feeling that the protesters will act with unity and will abide by some truce if their demands are met? Is there a sense, in other words, that those in leadership position have control over the crowd, if you will?
BLACK: There is certainly, perhaps, an extreme right-wing faction to the protesters that are not answerable to the mainstream opposition party leadership and haven't really been throughout this crisis. And they do tend to be the more militant in the crowds. These are the ones that really take the fight directly to the Ukrainian security services, the ones that have been most aggressive.
But what they have been most aggressively fighting for are pretty much the same demands that the rest of the larger, more moderate crowds have been demanding as well, and that is an end to the Yanukovych government, an end to his leadership of this country.
So, if he does come out of these meetings tonight with the European foreign ministers and say, "I will give the people of Ukraine the chance to decide on who should be president in the near future," then it's possible they could be satisfied with that, although, there is no doubt, that is the element of the crowd that will be toughest to satisfy.
Certainly for the broader majority of the crowd -- and we're talking about, really, those that make up the vast thousands that have been regularly filling this square peacefully and who do, to a much greater degree, follow the mainstream leadership of those opposition political leaders -- that's something they would very satisfied with and it's very likely that a good many of them would consider it a win.
Having said that, I think they would be cynical about Yanukovych's willingness to go to an election, and then they would look very, very strictly at the way any possible election was conducted. They would be certainly on the lookout to ensure that such a vote would be conducted absolutely fairly, Maggie.
LAKE: Phil Black for us, live tonight in Kiev. Thank you so much, Phil.
Ukraine is holding a day of national mourning for those killed. Ukraine's ambassador to the United States (sic), Yuriy Sergeyev, told CNN the only way out of this crisis is to get all parties to the negotiating table.
(BEGIN VIDEO CLIP)
YURIY SERGEYEV, UKRAINIAN AMBSSADOR TO THE UNITED NATIONS: The violence should be stopped, and what is needed, the wisdom and responsibility from all the sides. The first demand of all the people from around the world, to stop the violence. And then, to return to negotiations. This is badly needed. We are too far with this crisis. When people are being killed for nothing.
(END VIDEO CLIP)
LAKE: Alexander Kliment is director of emerging market strategy at Eurasia Group. He joins us tonight in the studio. Alexander, thank you so much for being here. Obviously, this is a fast-moving situation --
ALEXANDER KLIMENT, DIRECTOR OF EMERGING MARKET STRATEGY, EURASIA GROUP: Right.
LAKE: -- it appears that we have a major development, and yet, we heard Phil say there's deep cynicism. How much hope should we hold out that this will represent a new chapter in Ukraine's struggle?
KLIMENT: Yes, I think this is certainly a welcome bit of positive news after what's been a pretty tragic few days. I think it's important to treat this news with a certain amount of caution, though. The underlying conflicts that are going on in Ukraine right now, which are increasingly zero-sum conflicts, remain, and those are basically three conflicts.
The first is between Yanukovych and the opposition. The second is between Eastern Ukraine, which is traditionally more oriented towards Russia, and Western Ukraine, which is traditionally oriented more towards Europe. And thirdly, of course, the kind of geopolitical scale, Russia on the one hand and the West on the other. Until --
LAKE: Which, of course, has been complicating things.
KLIMENT: Has been drastically complicating things. I think the point to remember is that a credible and stable solution to this problem, the crisis in Ukraine, is not achievable unless all three of those dimensions are credibly addressed. So, I think that's the thing we have to look for in the coming days.
LAKE: My first question is, does there appear -- if there is going to be an election, if there is going to be a new government, does there appear that there is an alternative to step into this void?
KLIMENT: I think fresh elections would certainly be a step in the right direction. I would point out, though, that irregardless -- irrespective of how the situation plays out, you could still have a governance crisis in Ukraine. If an opposition government comes to power, it's possible that elements in Eastern Ukraine supported by Russia could sort of reject central government authority.
Obviously, if Yanukovych stays in power, Western Ukraine might do the same with respect to the central government. So, no matter how this situation turns out in the medium term, we still have the prospect of some kind of governance challenges in Ukraine over the next six to nine months at least.
LAKE: Against a backdrop with an economy that is incredibly weak, some would say in free fall, which is not going to make that any easier.
When it comes to the larger geopolitical scope, as the protesters and the government have been trading accusations at each other, so have the EU, the West, the US, and Russia. Do those powers need to come together as well around the table to try to find a solution, a way forward for Ukraine? How critical would that be?
KLIMENT: I think it's absolutely essential. It's absolutely essential. And the way that the Russians on their side and the West, the EU and the US on their side, have been speaking about this appears to leave very little room for compromise on this issue.
So, we can get a domestic settlement that holds for some time, but as long as these external powers are still jockeying and exerting influence over what's going on in Ukraine, we could continue to have a problem for some time.
LAKE: And Alexander, we're out of time, but you are -- you do cover emerging markets as well. I know there's some fear that this could spread beyond Ukraine, this unrest. Is that some something that you're concerned about?
KLIMENT: Well, I think the two things that people are looking at from the market perspective are one, is there a heightened risk of Ukraine defaulting on its foreign debt, which is a big issue? And second of all, I think, in the second order of concern is would there be some kind of risk to energy shipments that go across from Russia to Europe via Ukraine in oil and gas? I think those are the two key things as far as contagion is concerned.
LAKE: All right, Alexander Kliment from the Eurasia Group. Thank you so much for joining us tonight.
KLIMENT: Thank you for having me.
LAKE: The European Union sent a firm signal to Ukraine on Thursday by imposing sanctions. The EU has agreed to freeze assets and ban visas for those responsible for human rights violations. Export licenses on equipment that could be used for internal repression, such as anti-riot gear, have been suspended.
EU foreign policy chief Catherine Ashton said those who perpetrated the violence should be brought to justice. She added that the Ukrainian government needs to take its responsibility extremely seriously in that regard.
Britain's foreign secretary, William Hague, said there was widespread horror in the EU and the UK at the loss of innocent life in Ukraine. He says the European Union's priority now is stopping the violence.
(BEGIN VIDEO CLIP)
WILLIAM HAGUE, BRITISH FOREIGN SECRETARY: It is not right to describe protesters as terrorists. A great many of them, of course, are simply seeking a better future for their country.
And I think the European Union today has to act in a way that helps to stop the violence, because without an end to the violence, there will be no other progress of any kind in Ukraine, either politically or in the desperate economic situation of the country. So, helping to stop the violence is the immediate priority.
(END VIDEO CLIP)
LAKE: CNN's Jim Boulden joins us now, live from CNN London with the latest on the sanctions. Jim, we talked about what some of them were. What are the EU trying to achieve here? And of course, this also, this news happened before the very latest development that reported at the top of the show, it should be pointed out.
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: Yes. It's very fast- moving, isn't it? So, what happened is, if you think about it, there are three foreign ministers in Kiev, that's the French, the German, and the Polish. They were meeting face-to-face with the president, and they were meeting with opposition leaders.
Meanwhile, their counterparts all gathered in Brussels this afternoon to sort of put up another sort of unified voice to tell Ukraine we really mean this, you have got to do something to stop the violence.
And so, they didn't do that much, really. They did exactly what the US did, which is say they will ban travel for some officials and they will freeze their assets if they can get a hold of those assets in the EU. So, Ukraine officials who they would say could not travel within the European Union.
Now, I think that's more symbolic than anything else, but it shows a first step for sanctions, not economic sanctions. Obviously, they don't want European companies selling anti-riot gear to the Ukraine government right now, so they want to try to freeze that as soon as possible.
But it's really showing a unified voice. You heard William Hague, there, very strong terms, indeed, condemning -- on the part of the UK, condemning what's going on in Ukraine. So, they're trying to say this is the first step, we can do this very quickly.
Obviously, there are other things they can do. And Maggie, I should tell you, even though Ukraine obviously is outside the European Union, the EU does spend a lot of money in Ukraine because it's a neighbor. Think about it, of course, next to Poland.
They've tried to help them with their -- airlines, and they're trying to help them with their flight controls and modernize a lot of their infrastructure when it comes to their subway systems, for instance.
That's money coming from the European Investment Bank to try to help Ukraine bring up its level of infrastructure. So, there is a lot of money spent in Ukraine, so there is more the EU can do if they need to do it. Maggie?
LAKE: And Jim, they're speaking with a unified voice, but some have said that that voice has come too late, they didn't do enough earlier when they may have had the ability to exert more influence, and that they're really behind the curve here. Is that criticism fair?
BOULDEN: Well, you think about what's happened the last few hours. You're talking about President Obama, you're talking about Chancellor Merkel, President Putin, all on phones talking to each other. You've got foreign ministers on the ground going back and forth, literally going back and forth.
Obviously, this has come after we saw the massive -- the number of deaths today, the tragic number of deaths this morning in Kiev. So, they are obviously on the ground trying to stop this. The problem is, your guest beforehand pointed out, is that Ukraine is split between East and West in their views.
And of course, a lot of this happened because the European Union was negotiating with Ukraine to have closer political and economic ties, to bring Ukraine ever closer to the European Union, which of course, this parts of Ukraine who want to look more towards Moscow did not like that.
And the guest was really, really careful about this, it's important to note: a lot of oil and gas come through Ukraine from Russia, and Russia controls the price of what Ukraine pays as well. So, there's a carrot and stick on both sides, and it is very economic-oriented, Maggie.
LAKE: Economic-oriented and very complicated. Jim Boulden, than you so much for joining us tonight.
Still to come on QUEST MEANS BUSINESS, scenes like these in Kiev are sapping confidence in Ukraine's economy, and there wasn't much of that to begin with. We'll examine the damage the current unrest is doing to the country's prospects.
LAKE: As the violent protests in Ukraine continue, the economic instability that helped trigger them is getting worse. The country's borrowing costs have risen sharply as investors get nervous, while the value of its currency has fallen to a multiyear low. It's depending on a $15 billion Russian bailout, but the next installment of that money has been delayed until the end of the week.
And now, there are fears that an economic shock in Ukraine could destabilize other Eastern European nations. The currencies in neighboring Poland and Hungary are also falling as this unrest goes on.
Well, despite the violence, Mark Mobius, an emerging markets fund manager, is optimistic about Ukraine's future. He told CNN's Nick Parker that Ukraine's economy is, in fact, perfectly positioned.
(BEGIN VIDEO CLIP)
MARK MOBIUS, EXECUTIVE CHAIRMAN, TEMPLETON EMERGING MARKETS GROUP: We believe that Ukraine, oddly enough, is in a sweet spot, although you have all the violence and conflict. Between Europe and Russia, they can pick and choose and get benefits from both sides. And I believe they will be moving more and more towards Europe, but they will continue to be very friendly with Russia. That's the end game after all of this is over.
NICK PARKER, CNN INTERNATIONAL CORRESPONDENT: In the short term, are you disturbed as an investor by the violence we're seeing?
MOBIUS: Of course. This is not good, and we see that in various parts of the world. We're seeing it in Thailand and so forth. But it doesn't stop us from investing, because usually in times like this, prices go down, the economy goes down temporarily, if the currency gets weaker, it's an opportunity to buy inexpensive stocks.
(END VIDEO CLIP)
LAKE: Spoken like a true fund manager. Well, just like Ukraine, Serbia is an Eastern European economy wondering if closer ties with the European Union can help revive its economy. The country's economy minister resigned last month, and early elections have been called.
The deputy prime minister, Aleksandar Vucic, hopes the March poll will give his party the mandate to push through badly-needed reforms. The deputy prime minister joins me now from CNN London.
Thank you so much for being with us today. I want to start with getting your reaction to what's going on in Ukraine. You, as we mentioned, are also a country that has had past ties with Russia, and yet looks toward Europe for your future. What's your take on the events happening there, and what advice would you have for Ukrainian officials tonight?
ALEKSANDAR VUCIC, DEPUTY PRIME MINISTER OF SERBIA: First of all, thank you very much for having me tonight, and I've got to say that recently we have opened accession talks with EU and I think that we made a lot of progress for Serbia.
And of course, there to say that we do work hard and we are doing our best to avoid all kinds of unrest, all kinds of threats and mutinies. We have to reform our economy, as you said, but we did a lot in the past in establishing rule of law, of course. We fought corruption and organized crime and did something that makes a difference between Serbia and all the others in the region.
Because people do believe in their government, people do believe in reforms. And I think that we'll carry on with those reforms. We'll have to do that with full power, and I'm absolutely certain that we'll be very successful in the future.
We'll have to pass new laws, new bills, civil servants, labor law, some other important laws. But I think that people see that we are struggling hard, and we are doing our best to improve ordinary people's lives in Serbia.
And of course, we do hope that our friends from Ukraine will over come all the difficulties, but that's the reason why we do so much to achieve all the goals that we've put in front of us and to get closer to EU in years to come.
LAKE: Now, as you well know, it's very difficult when you're talking about making some of the reforms that you're facing, you having early elections. What makes you think you can succeed, especially when we're talking about something like labor reform, where the unions are very concerned that that is going to result in even higher numbers of jobless? How do you believe you can succeed in pushing through those reforms?
VUCIC: I truly think we have already succeeded to stabilize our economy. We declined the number of unemployed people, and I'm absolutely certain that with these reforms we can get more jobs for our people.
We have already succeeded to bring some very important investors from the West, like Mercedes, Porsche, from East like Etihad, Michelin from West as well. And I'm sure that creating better business environment, getting that labor law, getting these new laws, will bring more investors and more interest for Serbia.
And I have to say one more thing regarding your previous question. We have full political stability, which is very important for our region, for Serbia itself, for our people, and it provides us a good chance to establish not only rule of law, but to establish new rules for investment in Serbia.
And I think that we'll bring some new laws for one-stop shop and construction permitting. And I'm absolutely certain that it will bring more investors to our country. And of course, we are deeply concerned about everything that is happening in our region, but I'm absolutely sure that Serbia will avoid it.
Serbia is a very good place for investors, and I hope that investors will come in large numbers, and there is good news for them. Of course, we are going to be very dedicated, very committed, even devoted to reach our goals to join the EU in 2020.
But we're going to provide some special incentives for all investors that would come to Serbia in the next two years, which is great news for all of them that are interested in investing their money. And after all, I'm inviting you to come to Serbia to see that terrific place.
LAKE: Well, I appreciate the invitation. Deputy Prime Minister Aleksandar Vucic, thank you very much, and best of luck with your continued efforts at peaceful reform. Thank you for joining us.
VUCIC: Thank you very much. Thank you.
LAKE: Coming up, it's Facebook's biggest buy yet. Just how much did they pay for this popular messaging app? We'll tell you and what else that money could buy.
LAKE: Well, Wall Street has been digesting a shock from Facebook. It's spending $19 billion -- yes, that's with a B, billion dollars -- buying the mobile messaging service WhatsApp. Zain Asher joins us now, live from the New York Stock Exchange with the market reaction. I don't know, we were up today, Zain. Did it help?
ZAIN ASHER, CNN BUSINESS CORRESPONDENT: Well, initially, Facebook shares were actually trading lower, so earlier in the day, it looked as though investors were basically saying $19 billion, really? Are you guys sure about this? Is it really worth it? How do we know it's going to pay off? Just to put that number in perspective for you, Maggie, that is basically double of what Microsoft spent buying Skype.
But then, as the day moved on, we saw Facebook shares actually trading higher. So, it could be that investors basically decided to jump in, thinking that they were getting Facebook shares at a bargain. But it also could be that investors began really seeing the underlying benefits of WhatsApp.
So, you've got to remember that this deal will actually help Facebook remain dominant in the mobile arena, but also expand its international base as well. It is very popular in the developing world.
But it really is all about growth. This is a company that's only four or five years old, it's a baby, but it has 400 million users, and some analysts think that it could actually reach a billion users in the next few years.
But just quickly, though, Maggie, in terms of the overall market today, we saw a mixed bag of economic data and investors really sort of picking and choosing which data they focused on. On the one hand, we had positive flash PMI on manufacturing.
But on the other hand, we saw jobless claims falling by only 3,000. Investors were a little big disappointed by that. And then we got another disappointing manufacturing report. But we still ended the market higher, up almost 100 points. Maggie?
LAKE: That's right. I think a lot of people think the weather is still playing a big hand --
LAKE: -- in some of this weak --
LAKE: -- so they're looking right through it. All right, Zain Asher, thank you so much, great to see you.
Let's explore Facebook's purchase of WhatsApp in more detail. Samuel Burke is here to talk facts and figures and numbers. Samuel, $19 billion, I know a lot of people initially read that and thought that they had misplaced the decimal point. What is Facebook getting out of this?
SAMUEL BURKE, CNN BUSINESS CORRESPONDENT: It's an absolutely astounding number. One thing is absolutely clear, private messaging apps are incredibly popular and have a very high premium to these social media companies.
For years, you and I have been talking about public messages, the messages to all of your followers on Twitter, to all of your friends on Facebook. But people want a private way to talk.
So, it's great if you, instead of sending text messages from one country to another and having to pay that high premium, you just use WhatsApp here to maybe for you to send a message from you to me, me to you, when I'm off in London, I won't have to pay those high text message fees, and then that's how we can talk back and forth, 450 million users.
So, what they're getting, really, Facebook, is an operating system that they never had before in these phones. It's not really an operating system, but Apple --
LAKE: It's a platform, though.
BURKE: It's a platform.
LAKE: It's a powerful platform.
BURKE: Yes, and Facebook has failed on that front. They've tried other things. So, Apple has their operating system, Google has their operating system, and Facebook really has its way into Mobile phones now.
LAKE: With this. Which makes sense, but of course, my question is, OK, so that makes some sense, but whenever I hear somebody's buying an app, I want to know, is the app making money, and is this going to make them a boatload of money, especially when you throw down $19 billion? The don't advertise, there's not really a revenue model for this company. Or is there?
BURKE: Well, they don't advertise, and they've said they don't want to advertise, either. One of the co-founders is strongly against having messaging -- advertising in something as private as one-to-one communication.
But they do have a revenue model. People kind of have this myth out there that it's free, this application, WhatsApp. But it's only free for the first year, and then after that, you have to pay 99 cents a year. There are 450 --
LAKE: Which is nothing, except if you have scale.
BURKE: Exactly, and boy do they have scale.
BURKE: Some people get it free for life, early adopters, but let's say a few hundred million of their users have to pay a dollar a year. I'm one of the people who's already paid the dollar. Boy, that's a great revenue stream.
And if it hits a billion users, like Zain was talking about, and many analysts do think that, wow, I wouldn't mind getting 99 cents from half of those people. So, there is a revenue model, unlike many of the free apps that we talk about.
LAKE: And we've also talked about the ability, maybe, for digital stickers and some other revenue things that would be in line and not in the advertising. I'm wondering, because when we often talk about acquisitions in the world of tech, we're talking about not buying, really, a product, but buying talent.
Who are these guys that founded it? Is this also maybe a way for Zuckerberg to get that talent in house under his roof? Are these guys shakers and visionaries in the tech world?
BURKE: Yes, I think it maybe too soon to say that they're visionaries, but they've absolutely disrupted the text messaging market. I used to have to pay to send text messages to Mexico, and it cost me a fortune. Now, it's just 99 cents a year.
So, really, they've disrupted this part of the telecommunications industry. The CEO has a very fascinating story from rags to riches, from apps to riches. He actually comes from Ukraine, and he wanted a cheap way to be able to text message back home. He was on food stamps in California, growing up on welfare.
He eventually went to Yahoo! and worked his way up and then created this little company so that he could send those text messages back home for very little. He owns about 45 percent of the company, Forbes estimates, so that would give him about $6.8 billion.
And then, his co-founder -- I think is absolutely the most fascinating anecdote of the day -- he actually applied for jobs in 2009 at some of the big social media companies like Twitter. And I was digging through his Twitter feed and actually found some of the tweets that he had tweeted out when he applied for those jobs.
So, let me just show you the one from Twitter, he said, "Visited Twitter HQ. Got denied by Twitter HQ. That's OK, it would have been a long commute." That was in May of 2009.
BURKE: And then just a few months later, he goes to Facebook in August. "Facebook turned me down," he tweeted. "It was a great opportunity to connect with some fascinating -- some fantastic people. Looking forward to life's next adventure." And little did he know that life's next adventure would be with Facebook, for, you know, $19 billion.
LAKE: Yes, in a slightly better situation. I'm sure they're all having a laugh about that. It just shows, never give up. All right, Samuel, great stuff, and I have a feeling we're going to be talking about this for a few more days. Samuel Burke with us tonight.
Well, still to come on QUEST MEANS BUSINESS, the Ukrainian government agrees to hold early elections after violence in Kiev kills dozens. We'll return to our coverage of the unrest in Ukraine just ahead.
LAKE: Welcome back, I'm Maggie Lake. These are the top news headlines we're following this hour. Poland's prime minister says the Ukrainian government has agreed to hold early elections and form a new government within ten days. Poland's foreign minister is currently in talks with President Yanukovych, opposition leaders and other EU officials. The agreement comes after Ukraine's deadliest day in decades. After visiting Kiev, European Union leaders have agreed to impose sanctions on anyone found responsible for the violence in the capital. The sanctions are to include freezing assets and banning travel within the E.U.
Three Al Jazeera journalists detained in Egypt will spend at least the next two weeks behind bars. Trial began today for Mohamed Fahmy, Baher Mohamed and Peter Greste. They're part of a group charged with spreading false news and aiding terrorists No evidence was presented and the trial was adjourned until March 5th.
Families divided for decades by the Korean War have been reunited at a North Korean mountain resort. Many of those affected are now in their 80s and 90s. This could be the last time they will see one another. Hundreds more North and South Koreans will participate in a series of reunions over the next six days. As news spread of a possible breakthrough in Ukraine, demonstrators remain in Kiev's Independence Square tonight. These are live pictures from the Ukrainian capital. As we told you, Poland's prime minister says Ukraine will form a new government within ten days after weeks of unrest. Our senior international correspondent Nick Paton Walsh has been covering the violence. We warn you, some of the images in this report are disturbing.
NICK PATON WALSH, SENIOR INTERNATIONAL CORRESPONDENT FOR CNN INTERNATIONAL: this is what a truce looks like, protesters carried away from police lines dead, wounded. Gathered inside the lobby of the hotel under the sheets, head wounds. Most here hit by bullets are dead, the number rising. Together with disbelief and rage. Outside this makeshift morgue and hospital, live fire whizzed around. Eight hours earlier the president agreed on a truce and something changed. Police suddenly withdrew and protesters moved forward -- it's unclear why. This man said he fired a shotgun at police once protesters had been fired upon by a sniper. He didn't want his face shown. And this man said stun grenades had injured protesters, causing them to surge forward. Opposition leaders blamed the provocation in the debris of what was once peaceful protests, shotgun pellets, the tips of live rounds, ring pulls from grenades. On the road up to Parliament, police and protesters face to face. Barricades being reinforced as many fear an escalation is ahead. "Are you ready?" one protester asks a young man behind his (ride) shield). He may not be. Ukraine may not be - what comes next? Nick Paton Walsh, CNN Kiev.
LAKE: In a show of solidarity with protesters in Kiev, two members of Ukraine's Olympic team have withdrawn from the Games. Alpine skier Bogdana Matsotska and her father and coach said that they could not go on with the Games. They said their withdrawal was a protest against lawless actions made toward protesters. In an exclusive interview, former Olympian champion Sergey Bubka told CNN's Amanda Davis that he was shocked by the violence in his home country. Bubka started the interview by explaining the reasoning behind the athletes' withdrawal from the Olympics.
SERGEY BUBKA, PRESIDENT, UKRAINE OLYMPIC COMMITTEE: (Inaudible) Bogdana Matsotska and her father's coach. Yesterday evening they made decision that their personal decision not to continue in slalom. I had meeting with them today. I discussed with them, we express condolences, very said moment for the nation. They said it will be very difficult for her psychologically to continue competition, and this is personal decision to stop competition and rest of the team they also coach and Bogdana support the team who will continue to compete and wish them to bring the medal.
AMANDA DAVIES, SPORTS CORRESPONDENT AND ANCHOR FOR CNN INTERNATIONAL, BASED IN LONDON: There has been suggestion that there was a request to the IOC for your team members to wear black armbands. Did that happen?
BUBKA: Yes, this issue was rised and we had discussion and conversation with the IOC in which way we can do and we decided to find another way to do support and express our sadness and our tough moment.
DAVIES: So what was that?
BUBKA: This was minutes of silence and the possibility for the outlet speak to the media, express their feeling what they feel. We did official statement on behalf of official delegation of Ukraine. Personally, I did statement on my Twitter on my website and outlet also has the possibility they (inaudible) technology, we decide to go this way.
DAVIES: As somebody who did so much to raise the profile of the Ukraine through sport, does that make these pictures that you see on the television even worse?
BUBKA: I can tell you still now I couldn't believe - I couldn't believe that happened in my country, because Ukraine is so nice. Country is beautiful. We are kind, we are friendly, and we show in many international events our outstanding hospitality. And the foreign guests, foreign friends when they're visiting, they really amazed about us. What in this moment - I cannot believe it. We cannot go against each other. We needs to understand each other. We must listen, we must go back to dialogue. We need to save the peace, save Ukraine, save our people, save our nation and build future together.
LAKE: As clothing retailer Gap raises the minimum wage for its U.S. workers, the treasury secretary tells us many more employers need to do the same. We'll hear from Jack Lew after the break.
LAKE: The U.S. Treasury secretary says he sees good signs for the economy, both on Capitol Hill and Main Street. Jack Lew is also pleased with clothing retailer Gap which says it'll raise the minimum pay of 65,000 U.S. employees to do at least $9 an hour from June. Lew tells CNN's chief business correspondent Christine Romans other employers need to do the same.
JACK LEW, U.S. TREASURY SECRETARY: I don't believe that it's right for people to work for 40 hours and take home pay that's below the poverty line. The President made it very clear that as a country we have to make sure that if you work full time, you're at least at the poverty line.
CHRISTINE ROMANS, CNN's CHIEF BUSINESS CORRESPONDENT: Think you can get that done this year? Do you think that you can push - I know the President said -
LEW: He's done an executive order -
ROMANS: -- with an executive order - you know - a small sliver of the --
LEW: We're going to keep pushing at it. It's obviously not in our power to force Congress to act, but we can make the case for it and we can have the American people make the case for it and we're going to continue pressing because it's the right thing to do.
ROMANS: The CBO report this week really gave the people who are against it what they feel is ammunition - you know - there would be a job loss, it would be a poverty-alleviation program on the backs of small businesses who'd have to pay for it.
LEW: You know what, I think if you look at that CBO report, it also showed that it would take almost a million people out of poverty. There are a lot of different views on the economics of the minimum wage, you know, I know that the studies done by a number of people including Nobel Laureates show that it has the opposite effect. I tend to think that they're right, but we have time for that debate.
ROMANS: Someone who's had your job - Larry Summers - he's been writing that we are becoming a 'Downton Abbey' economy. Do you agree with him?
LEW: I don't think that - I don't think we have to be, I mean, you know, I think it's more of a prediction than it is an assessment -
LEW: -- and I think if you do the right things, we can create opportunity. You know, one thing about American people generally is if they're doing well, they don't begrudge other people to doing well.
LEW: They want a chance to have a middle class job. And we can - we can solve that problem.
ROMANS: Just as you head off -- as you head to the G20, you're more confident than I've heard you in a year on the job about the atmosphere in Washington for getting stuff done.
LEW: Well, the last four months have been very different from the prior two years. I think, you know, I don't want to overstate the situation. You know, it's going to be challenging to do hard things. We'll see when everyone gets back after this break and we do some more. You - obviously it's an election year, so it - you know - it's not going to be as possible in the fall and the summer as it would be in another year, - -
ROMANS: Do you think immigration reform (inaudible) heading into next year?
LEW: -- but we - I think immigration reform is something where there is bipartisan majority that wants to take action. I think that it is something where the direction of policy, you know - there's clearly an interest. I know that there are a lot of statements coming out of Washington that there are disputes --
ROMANS: Among Republicans.
LEW: -- even within the Republican Party -
LEW: -- but, you know, I think it has certain attributes that make me feel that there's going to be action at some point in the not-that-distant future. I don't know if it's the first few months or the next year or two.
LAKE: Marriott International had its most productive year ever in 2013 according to the CEO. The hotel group signed contracts for 60,000 new rooms, the equivalent of one new hotel a day. I spoke to the CEO Arne Sorenson and asked him what's driving growth in the United States.
ARNE SORENSON, CEO, MARRIOTT: Really what we saw again in the fourth quarter of '13 was the U.S. economic growth continuing. Obviously we suffered severely in 2009/2010 as did so many industries. But since 2010, we've been building steadily, and that carried all the way through 2013. So we look at RevPAR growth which is essentially our same store sales measure. We were up about 5 percent, which is good, solid performance. Probably not as dramatically positive as might have been the case coming out of prior recessions, but nevertheless, a sign that the economy is continuing to build. And then the best news is we saw a great deal of new hotel signings in 2013. We signed a bit more than one hotel a day over the course of the full year.
LAKE: That is a lot. Is that a sign that business confidence is back?
SORENSON: It's a sign - no, those are -- that's a global number, so we signed 67,000 rooms in 2013. We signed more in the United States than we have at any time since about 2007, I believe. We're still down over 50 or 60 percent from the levels we'd signed in the United States in 2007. So you can see we're not back to the same level, but we are seeing greater availability of financing for new-build projects, particularly in secondary and tertiary markets. We're not seeing much of the higher-end full service hotels that are being built in the United States, but the rest of the world is of course -- is a different story from market to market. We're seeing growth in Asia continuing. Of the 67,000 rooms we signed last year, 22,000 of them were in the Asia Pacific region.
LAKE: And is that Asia Pacific strength really centered around China?
SORENSON: It's a - China is the biggest market there. But not necessarily at the moment the most vibrant. You look at Thailand and Indonesia, to take two other markets, very strong in 2013, good development as well as good same-store hotel performance. Thailand is weakening now a little bit, the political situation in Bangkok is a bit of a downer for folks who are thinking about going to Thailand. Indonesia continues to crank along very powerfully. I think we see China improving actually for our business, although 2013 for the existing hotels was a flattish kind of year in China.
LAKE: And what about global growth for 2014? Are you feeling optimistic? It seems that we started the year on a positive note, but there have been a lot of concerns creeping in. We've seen emerging market volatility. How are you feeling about the outlook?
SORENSON: Yes, it's interesting. I was in Davos about three weeks ago, and the sentiment in Davos was very bullish. And somebody said at one of the sort of closing meals that we had, if it's that bullish we know we can't be right. So it's going to be worse than we anticipate. I said then and I think it'd still have the view that we should expect in 2014, a year a lot like 2013, which is not all bad for us. So, it suggests continued GDP growth - maybe not at spectacular three plus levels or 3 to 4 percent levels, but good, solid real growth from where we've been in the past. That means for us we think we ought to be able to get about 5 percent RevPAR growth, and we ought to get about 5 percent new unit growth as well. So, you put those two things together, and it should be a really good year for Marriott in 2014.
LAKE: Choice Hotels International is taking on TripAdvisor and all the rest with its own system for authentic online reviews. Guests who want to review a hotel on the Choice Hotel site will have to enter their booking confirmation numbers to prove they actually stayed there. Choice Hotels' Steve Joyce is here with me in the C suite tonight. Steve, thank you so much for being with us.
STEVE JOYCE, CEO, Choice Hotels International: Thanks for inviting me.
LAKE: You're opening up to reviews -
LAKE: -- kind of risky, isn't it?
JOYCE: Well, it's in some ways, but we've always had a regular dialog with our customers, and so we have not -- up to this point - we did a couple of tests before, and just to make sure that we thought it would work and customers would like it -
JOYCE: -- and so - and the response has been phenomenal. And what happens is when customers see real honest responses that they know they can rely on, they actually have a much higher level of confidence in booking that hotel. So in the early states - and it's still early for us - we're seeing very positive reactions from the consumers, and they are saying both positive things as well as constructive criticism.
LAKE: One would hope.
JOYCE: One would hope. And at the same time, though, it gives them more confidence, so we're actually seeing conversion rates or their likelihood to book once they're seeing those responses, actually has gone up. So, we view that as a very positive response. We like it because they don't have to go somebody - someplace else for their reviews -
JOYCE: And we know the reviews are legitimate, which actually has been a big issue with a lot of consumers.
LAKE: Right, it has, especially with online review sites, whether it's from competitors or just people who have a grudge. And I guess what you want is to engage with your customer - that's the toughest thing -
JOYCE: Yes -
LAKE: -- and it gives you an avenue to do that.
JOYCE: And it's a dialog where they can tell us what they think, where we can talk back to them at the same time, and it's a constructive feedback mechanism for our franchisees and for general managers.
LAKE: So since you are hearing from them, I want to know - we often talk about the middle class being squeezed - being disappeared, even though we're in recovery. This very much your clientele - what are you hearing from them? How is the U.S. consumer doing?
JOYCE: Well it's interesting, there was a little loss of momentum when the government shut down, and that cost us in our fourth quarter numbers even though we had a record year by all levels - it slowed us down a little, and consumer confidence took a hit. But you know what? It bounced back in December, and January and February have been very strong. So, we think consumers are very confident about the jobs they're holding, a number of our folks are beginning to see new jobs and new work for themselves or the prospect of new jobs, and as a result, they are traveling more and we expect it - that to build during the year.
LAKE: That's good news. You're not only investing -- your opening up to online reviews - you're also investing heavily in technology --
JOYCE: We are.
LAKE: -- (inaudible) SkyTouch, your own booking system - it takes a lot of money and technology's not cheap. Why do you think that's going to give you the edge?
JOYCE: Well, first of all, the distribution environment in the hotel business has become totally electronic - it's moving totally mobile, and so as a result, we have a proprietary system that we built that is the only massively-distributed cloud-based platform, which changes costs, it improves credit card security, it gives a lot more opportunities for the managers of those of those hotels to manage their hotels from different sites, if they have multiple hotels. A lot of our folks spend a lot of time in India, they can manage from there, so that there's a lot of benefits that come with the system. We're higher reliability and much lower cost, because it's a (SAS)-based system. So it's a generational difference, it's not an incremental difference. And so what we found is we don't view it as a competitive advantage - that's not why people buy us. People buy us because we put customers in hotels. And our franchisees like the idea of that system being improved. If we have a wider platform of customers, they will be - we obviously like the price that we saw on some transactions today. I don't think people are going to look at our system quite the same way. But we're excited about creating value for our shareholders through that, and also creating a bigger base that our reach goes to in terms of other hotels that aren't necessarily part of our brands.
LAKE: That's right. So all about the growing the business. Steve Joyce, thank you so much for joining us today --
JOYCE: My pleasure.
LAKE: -- CEO of Choice Hotels. All right, time now for our check of the weather. Jenny Harrison is at the CNN International Weather Center. Jenny, Steve and I were just talking. I believe I saw the sun today. There was actually a thaw.
JENNY HARRISON, WEATHER ANCHOR FOR CNN INTERNATIONAL: (LAUGHTER).
LAKE: I have a feeling you're going to tell me it's too good to last.
HARRISON: No, no not at all. Maggie, (inaudible) in between the snow, the rain has been very nice indeed and temperatures actually quite above the average too across many portions of the United States. But it's also that time of year - the severe thunderstorms kicking in. Look at this the last few hours. You can see all these warning boxes. The yellow's the thunderstorms, the red, tornado watches. And in fact one tornado has been reported in Virginia and in Illinois. It's really about this weather up into the Midwest - the upper Midwest -- weather concerns really lie. And it's because of this. We have had weeks of just frozen ground and a huge amount of snow. Now we've got rain coming in, lighter temperatures, so all of that means we could have a very sudden snow melt in some areas. So what'll happen to all of that water? You can see in Chicago 172 centimeters of snow. The fifth snowiest year and the third snowiest January ever on record. So, all of that with that frozen ground, heavy rain on top is why there are warnings in place or flood warnings and watches across much of this region. The winds very strong as well, so in fact the visibility has been going steadily down throughout the last few hours. Just .2 kilometers in Chicago, Milwaukee .8, there's heavy snow as well to the north of Chicago. So, with those very, very strong winds and amounts of snow like this - 26 centimeters in Minneapolis. That really does make for some (blizzard) conditions. So, not a good night ahead Thursday on into Friday. Not around this particular storm system. But at the same time, we have got rain and thunderstorms working their way eastward, very mild air across the Southeast. And so of course that whole combination - cold air, mild air and that is when we see the thunderstorms. It's a very swiftly-moving system, though. Even the snow moves out of the picture pretty quickly. But I'm afraid before then, we have got these warnings in place. As I say, there's a chance of some more isolated tornados as well as those strong winds and heavy rain. Meanwhile, across the northwest of Europe, showers have been coming down in the last couple of days. A much better scenario. Let me just show you these pictures - we'll end on this probably, Maggie. This is obviously during the height of the floods. Look at it now. It's incredible that as we go through some of these images and just see the before, during the rains, after how roads have dried, and this really is along the line of the Thames, and because of that, the water from there has cleared much quicker. So, just good to see finally in some areas, even if it's just a small area, things are looking better. There's a few more showers on the way, Maggie. Some more rain, but not as heavy as we've seen over the last - well - couple of months now.
LAKE: And that is very good news indeed, Jenny. Thank you so much. And we will be right back with more "Quest Means Business" after this break.
LAKE: We want to recap our top story tonight, a day after the deadliest violence Ukraine has seen in decades, the promise of new elections. These are live pictures from Kiev. Ukrainian government has agreed to hold early elections and form a new government within ten days. Constitutional reform will come this summer. That is according to a statement released by Polish prime minister Donald Tuss. Poland's foreign minister has been part of the ongoing talks with President Viktor Yanukovych, opposition leaders and E.U. officials. And that is "Quest Means Business." I'm Maggie Lake, thanks for joining us.