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Lagarde to Head IMF; Interview With Steve Ballmer

Aired June 28, 2011 - 14:00:00   ET


JOHN DEFTERIOS, HOST, QUEST MEANS BUSINESS: Lagarde wins, the IMF keeps it in Europe.

Rage and riots in Athens. Tonight the government spokesman tells us the austerity plan will pass.

And a Window on to the cloud, Microsoft CEO Steve Ballmer on the company's newest venture.

I'm John Defterios in for Richard Quest. This, of course, is QUEST MEANS BUSINESS.

Good evening.

Christine Lagarde is the new managing director of the International Monetary Fund. Within the last half hour the IMF's executive board announced it had chosen the French finance minister over Mexican Central Banker Agustin Carstens. The president of the World Bank, Robert Zoellick has already sent this congratulations. CNN's Felicia Taylor is in Washington at the IMF headquarters and joins me now.

Well, they didn't take a whole lot of time to make the decision, right? Hot off the presses, Felicia.


FELICIA TAYLOR, CNN FINANCIAL CORRESPONDENT: It is indeed hot off the presses, but it certainly felt like there was suspense building all morning, here in Washington, D.C. We know that the members of the board, the executive members of the board, met at beginning at 10 a.m. Eastern Standard Time. The announcement was released just a few minutes ago. Let's hear what the official had to say.


The International Monetary Fund has today selected Christine Lagarde to serve as the IMF managing director, for a five-year term, starting on July 5, 2011. Miss Lagarde who succeeds Dominique Strauss Kahn, will be the first woman to be the managing director of the International Monetary Fund.


TAYLOR: Lagarde now makes the fifth French minister-or rather, managing director, of the IMF, as he said the first woman to hold that post. And she will hold that post for five years, beginning on July 5. Now, as we have been leading up to this, since the process began on May 20. There has also been another candidate, Agustin Carstens, from Mexico. And certainly, many emerging countries, developing economies were looking forward to having somebody from a likewise developing economy. So there was much support behind Agustin Carstens, but what is significant about the announcement that was made today, is that it was done by consensus. In other words everyone put their hat into the ring, and agreed that Christine Lagarde was the appropriate choice for managing director of the IMF, John.

DEFTERIOS: Felicia, we're going to go to Greece and get the latest from Athens, but number one, at the IMF headquarters they have to have one eye on Athens and trying to get that vote through tomorrow. She has to signal quite strongly right now that she will not give up this fight for austerity, because she is a European.

TAYLOR: Absolutely right. I think there is not question that she will continue to believe that that is the appropriate steps forward in saving these economies and worrying about whether or not, you know there will be any kind of a contagion after Greece. But she will be very supportive of those that she has been thus far. That was one of the main concerns of those critics of Lagarde is that she, and I'm quoting someone, would use the IMF as a piggybank, and shouldn't be doing that. It was a gentlemen that we spoke to earlier to day.

But, indeed, she has had no evidence of that. She has come forward and said that she will remain independent. That the IMF belongs to no one, but the member nations, the 187 member nations, of the IMF. So she has said that she will not be favorable, more so to anyone country than another, specifically to a European economy, John.

DEFTERIOS: OK, one more follow up here. We were watching closely what is going to come out of this Lagarde's statement. And that is coming out now. And she says she is deeply honored to get the trust of the executive board. Did she have to make a deal with China to get a managing director, a deputy managing director like Zhu Min? Had they decided who- one of the deputy managing directors needs to be from an emerging market? If so, will it be a Chinese or not?

TAYLOR: We don't know the answer to that. But certainly there has been some debate as to whether or not those discussions could have taken place. Zhu Min is now part of the IMF. She has the opportunity to pick three deputy managing directors. John Lipsky, who is the deputy managing director at the moment and the current head of the IMF, will be stepping down at the end of this summer. So presumably she will make her choices soon. Clearly, China was a very important country for her to have the backing of. What kind of agreements could have been made is unclear. But obviously, China is one of those emerging economies that had great sway when it came to who the selection process would-or who the selection candidate would be. So, there may have been some discussions. I imagine we'll be hearing a lot more about that. And the selection process of that deputy managing director begins, I would imagine, quite soon and hear an announcement before the end of the summer, John.

DEFTERIOS: OK, Felicia Taylor, live at the IMF headquarters on the announcement from Christine Lagarde. Who wants it noted that, again, she is deeply honored in the trust given to her by the 24-member board. Now to our second big story of the night and that is the decisive moment for Greece and for the global economy for that matter. Tonight, Greek lawmakers are preparing for a make or break vote. If they approve harsh austerity measures on Wednesday, if the economy survives another day; if they vote against it, it could mean default, disorder, and perhaps disaster for Europe and the world economy.

Richard is in Athens tonight.

Let's start by taking the pulse of the protests, Richard. They flared up earlier. Have things settled down ahead of the big vote as you arrive in Athens?

RICHARD QUEST, CNN ANCHOR, QUEST MEANS BUSINESS: Well, they certainly aren't as violent as they have been earlier in the day. But the crowds are just as loud and they are just as voluminous in that sense. Now in the last 10, 15 minutes there has been some more stun grenades fired by the riot police and some more tear gas, which is now wafting across the stage. Meanwhile the bulk of the protestors in the middle of the square continue to sing old revolutionary songs, hoping in some shape or form, to have to influence the debate taking place inside the parliament building.

So, earlier in the day when, it did get more violent, and there were certainly a lot more tussles with the authorities one policeman and several people were injured as that took place. And meanwhile, slightly removed from what is happening in the square, European officials have been ramping up the rhetoric to both the protestors, and particularly, to the Greek politicians.

Olli Rehn, the EU commissioner, says that Greece is at a critical juncture. Meanwhile, Herman Van Rompuy, the president of the council, the permanent president of the council, he says that what happens here in Athens next will be decisive for the whole world.


HERMAN VAN ROMPUY, PRESIDENT, EUROPEAN COUNCIL (through translator): There are decisive moments and the next hours will be decisive. Not only for Greece but also for the Eurozone and the stability of the European economy.


QUEST: Now the interesting thing about all of this is, the European officials aren't saying anything that we haven't heard before. There is not alternative. There is no plan B. It is decisive. Yes, you are sovereign, but you have responsibilities, so a lot of the same things. But the tenor and tone has increased, because they know, John, that if the Greeks voted against this tomorrow. Then all bets are off. And frankly, no one can say which way it will fall out.

DEFTERIOS: A great deal of weight on the Greek people. Richard Quest is in Athens for us. We are going to go back to him, but earlier I spoke to the Greek minister of state, and the chief government spokesman, Elias Mossialos. I asked him if anything will stand in the way of getting, as Richard, suggested there, those austerity measures through the parliament.

ELIAS MOSSIALOS, SPOKESMAN, GREEK GOVERNMENT: We have the parliamentary procedures, today and tomorrow, in the parliament. And we expect that (UNINTELLIGIBLE) will vote in favor of the middle-term package of the Greek governments contribution to the parliament.

DEFTERIOS: I see there are four wavering MPs from the ruling party, the socialist party. What are you doing to make sure they stay in the party and vote your way?

MOSSIALOS: We are not dictating behavior, but we are expecting that all PMs, all Pasok MPs will vote in favor of the new plan program.

DEFTERIOS: Did you have to give anything way to make sure that they stay in the fold with you?

MOSSIALOS: No, we are not revising the plan, we are not revising the program.

DEFTERIOS: OK, why are we seeing the dissention in the ranks. We had one actually go on international television and suggest he was not going to vote with you.

MOSSIALOS: Yes, MPs can express their views. They are free to express their views on the basis of our constitution. We are engaging in a constructive debate and dialogue with them. I repeat again, we are not dictating behavior, but we expect that all of them will consider the important conditions of our country and will vote in favor of the plan.

DEFTERIOS: You are a very respected LSE (ph) economist, by training, what is the most compelling argument that you can give to the Greek people that this economy can handle $40 billion worth of cuts, and an economy around $300 billion in size, these days?

MOSSIALOS: Yes, this is a plan for the next four years, I have to say. Here we are going to have cuts to the tune of about 6.4 billion euros. It is not $40 billion in one year. So this a four-year program. But it is imperative to reduce our deficit and in particularly our large primary deficit.

DEFTERIOS: You know the argument, Minister, that there is a lot of pain on the Greek people, through 2015, but the debt to GDP will still remain about 140 percent. That is still very high from a level of say, an estimated 157, this year.

MOSSIALOS: Yes, that is the case. But on the other hand we need to look at the causes of this significant debt and the very high deficit. And we need to introduce structural reform to address the underlying causes of the symptoms of the high deficit and the high debt. If we do not address the causes, we are not going to address the problems we are faced with now.

DEFTERIOS: Is there a plan B if the vote does not go through. This is some of the discussion in Brussels right now, that the EU should have a plan B. Is there a plan B in Greece?

MOSSIALOS: There is no plan B. We are confident we are going to win the vote tomorrow.

DEFTERIOS: OK, final question for you right now is will people go for the cuts of 20 percent on wages, pension cuts of 15 to 20 percent. Will you actually get the support tomorrow after the vote in parliament?

MOSSIALOS: We hope we will have the support we need to proceed with the major reforms. If we do not proceed with the major reforms and restructure the Greek state, and the Greek economy, we are soon going to be faced with significant problems.


DEFTERIOS: So the government admits there is no plan B, but sounds confident it can deliver the package. But how about getting the Greek public on board and all those privatizations on the books? Let's go back to Richard, who is standing by in central Athens, with his view.


QUEST: John, many thanks. Yes, I arrived this afternoon because obviously, 48 hours, 24 hours, before the vote. We need to put this into the wider European context of what it means for the Eurozone. But the woman who has been doing sterling duty looking at this, throughout, Correspondent Diana Magnay. She is with me now.

Now, Diana, we are getting a bit of a whiff of tear gas coming over from the crowd, while it has been quiet tonight. But earlier today there were some very nasty scenes.

DIANA MAGNAY, CNN CORRESPONDENT: Nasty scenes, which happened really very soon after the first demonstrators came into the crowd. And immediately, violence started erupting and targeting camera crews like us. Let's just take a look at what happened to us a bit earlier.


MAGNAY (On camera): You can see there is quite a lot of fighting now going on between protestors and-


We are being forced out of the way, because it is really kicking up around that corner. The fire burning-


-in the buildings.



QUEST: When the 24 hours plays out, Diana, what do you expect? We are not forecasting that anything might happen in the square, but what would you expect to happen here.

MAGNAY: Well, I was surprised by how few demonstrators actually came out today. There are many more now that the evening has come. Tomorrow, when the vote actually takes place, you can expect 10s of thousands of people to come out onto the streets for the second day of this general strike, rather than just the thousands that we saw today. And we are expecting that vote to come through at some point tomorrow afternoon. And at that point, I would imagine that you will see similar scenes of what we did today.

QUEST: Diana, many thanks. Diana Magnay, here.

So, John, there we have the situation tonight.


Wow. This is what happens, basically.

If you just step aside for a second.

This is what happens, John, the stun guns get fired. The tear gas gets exploded into the crowd. And then the crowd run off into the distance.

A little more over to your left, I think, there, Peter.


QUEST: So, there you have it, John. And that has been the scene. And there goes another tear gas canister, into the crowd. It is not immediately clear what they hope to achieve, either side, here, because what tends to happen is they move away and the crowd merely moves back again, in about five or 10 minutes' time. And, indeed, as you can see, the crowd is already taking back its position at the barricades. A somewhat surreal experience because while that is happening on the one side of the square, on the other side of the square, what is basically a rally continues with revolutionary songs being sung, in a much more festive and party atmosphere.

Throughout the whole square, John, there is this uncanny feeling that at any given moment it could go to be a party festival, or a downright riot. And sometime it goes backwards and forwards between those two in the same minute. The next 24 hours will be telling for these protestors, for Greece, and for the Eurozone.

DEFTERIOS: That is for sure. Richard Quest live in Athens. And while he was speaking the market seems to be shrugging off the concerns down there with a gain of better than 120 points for the Dow industrials. While the world is watching what is happening there in Athens tonight. The question is how will all this look to the neighbors? There are all the people who will hopefully bailing Greece out. More on the reaction in Central Europe, when we come back.


DEFTERIOS: Across Europe tonight a chorus of voices pressing Greek lawmakers to vote for austerity. European Commission Olli Rehn says there is no plan B to avoid default right now. If Greece does not pass these measures it won't get the next $17 billion installment of last year's bailout and it won't be able to pay its debts. He says Europe can only help Greece, if Greece, basically, helps itself.

The credit rating agency Fitch is also turning up the pressure on Greek lawmakers. It says even a voluntary roll over of Greek debt would probably be seen as a default. And representing business leaders, there is the head of the Deutsche Bank, Josef Ackermann. HE is warning that default could spark a crisis worst than the one that engulfed Lehman Brothers, believe it or not. The collapse of the investment bank, of course, was the catalyst for the global financial crisis.

Germany is not only the most powerful country in the Eurozone, its banks have some of the greatest exposure to Greek debt right now. And the government has come in for much public criticism for bailing out the Greeks. Frederik Pleitgen is in Berlin right now and he joins me now.

Fred, it is very, very interesting, to read between the lines this is something we don't focus a lot on. Angela Merkel is going through what one pollster described as a very severe rough patch because of what she is trying to do to help the Greeks out. Can you give us a sense, can her coalition survive this?

FREDERIK PLEITGEN, CNN INTERNATIONAL CORRESPONDENT: Well, it certainly is very much up in the air. I mean, I don't think that the coalition is going to break over this issue. But there are some other issues that are making the governing coalition here, in Berlin, particularly weak at this point in time. And, of course, that is something that they don't need as they are trying to push through this Greek bailout.

Basically, when you talk to people on the street, here in Germany, they are not thrilled about probably having to put up a lot of German taxpayer money to help bailout Greece. If in fact, the Greeks do come through with their reforms.

But a lot of people that we have been speaking to also say they, quite frankly, believe that there is not really any alternative to this, as well. Historically, support for the euro has been very strong here in this country. People here don't want to give up the euro, even if it means putting up great sacrifices. But nevertheless, you are absolutely right. It is a very, very difficult issue. It is something that people here don't necessarily want to do. But many people, and the public here also see very little alternative. Even though you have smaller groups who believe that maybe there is some way out of this, or that maybe you could even let Greece default.

But those comments that you said, by Josef Ackermann, the head of Deutsche Bank, pretty much make clear how much of a risk the business community, the financial community believes a Greek default would be, John.

DEFTERIOS: Not easy on Mrs. Merkel, from her own coalition, certainly not easy from the largest bank in Germany, Deutsche Bank. Fred Pleitgen, joining us from Berlin.

Well, you had the statement a little bit earlier of Christine Lagarde who obviously got the nod as the managing director of the International Monetary Fund. Now the statement from the her competitor, Agustin Carstens, who was the number one candidate against her, representing the emerging markets, and of course, the governor of the Bank De Mexico.

He says, "I welcome the selection of Mrs. Lagarde as managing director of the IMF and extend her my best wishes and full support." He goes on to say, "I hope that under Ms. Lagarde's direction the IMF will make meaningful progress in strengthening the governance of the institution,"-an interesting note-"so as to assure its legitimacy, cohesiveness, and ultimately it effectiveness."

So, thanks to her and also a note to the IMF: "The emerging markets needs some support and governance needs to be improved, particularly with regards to the debt situation in Greece and other European countries."

Coming up on "Future Cities" this week, Richard has been very active and very impressive in the home of Copenhagen. He has a special guest. Let's take a listen.


QUEST: Coming up after the break, we show you what happens when royalty gets the builders in.

We took a chance, but we didn't do it like a gambling wheel, roulette, or poker-



DEFTERIOS: This week's "Future Cities" is the grand finale from Copenhagen and it doesn't get much grander than this. The renovation of the royal palace was a project as green as it was gold plated. The makeover included many measures to make the building more efficient, in line with the city's goals on the climate change and sustainability fronts. Richard got an exclusive tour with Crown Prince Frederik.


QUEST (voice over): In the center of the Danish capitol, in the heart of the city, are the four identical palaces of Amalienborg. These are the homes of Queen Margarita II, and the royal family, which has ruled Denmark for more than 1,000 years. This is the seat of power and authority in a country where more than 85 percent of the population is still fiercely in favor of the royal family.

(On camera): This particular palace is occupied by his Royal Highness the Crown Prince Frederik.

(voice over): Frederik has led a life close to his public. Delighting them with a modern fairytale wedding, to Australian Mary Donaldson in 2004. His Royal Highness takes an active interest to promote Denmark's effort at climate change and sustainability. It is a commitment evident in his own home.

(On camera): He has recently renovated the building, upgrading the standard, in tune with the ethos of the country and introducing exciting new art. His Royal Highness kindly showed me around.

Your Royal Highness, many thanks.


QUEST: Many thanks.

Let us move next door, and I think this shows us the size and the scale of that which you embarked upon.


QUEST (voice over): Almost seven years ago, with the building in disrepair, a number of rooms were chosen to become tributes to modern Danish art.

PRINCE FREDERIK: What I am trying to say is, first of all, this is a home to me and my wife and my four kids. But it is certainly, at the same time, it has become, a fantastic window of opportunity for my wife and I in terms of energy saving ideas, but also the possibility to put in modern Danish art, according to our taste.

QUEST: But why did you want to put the modern stuff? Because there must of have been people who said, with respect, sir-


QUEST: Good grief, what is he doing? This is an 18th century building that has housed previous kings of Denmark.


And this man is defacing it.

PRINCE FREDERIK: Defacing it, certainly. Of course, we had to take that into consideration. People were amazed that we had dared do this. We took a chance, but we didn't do it like a gambling, on a roulette, or poker. It was calculated, but it was also calculated, a risk, from our hearts.

QUEST: As we make our way through the rooms the gambling gets greater. Until we end up here.

(On camera): Oh, my goodness.

(Voice over): Where some might say he's bet the house.

PRINCE FREDERIK: What is behind me is special, to some it is controversial. To us it modern art, but it is also, in this particular case, a historical mark of the time. The thing is, with Afghanistan-

QUEST: With respect, sir, this is not just a piece of modern art. This is a piece of political theater.

PRINCE FREDERIK: Well, it is an interpretation, Richard. It is about-it is-I don't want to put politics into it.

QUEST: You knew eyebrows were going to be raised with this?

PRINCE FREDERIK: I certainly did, yes. But then, again-

QUEST: Did you want to?

PRINCE FREDERIK: Yeah, in many ways. Of course, I thought it was good to challenge people. I think what I like about modern art is it makes people talk.

QUEST (voice over): Modern art, it is not obvious where the art stops and the furniture begins.

(On camera): I mean, sir, with respect?

PRINCE FREDERIK: It is supposed to be-to have a clock on each side.


PRINCE FREDERIK: Obviously, it is on a long-term repair.

QUEST: Oh, I see. So, there is meant to be a clock there?

PRINCE FREDERIK: Yeah, yeah, yeah.

QUEST: Oh, I thought, I thought that-

PRINCE FREDERIK: The window of the icon.

QUEST: Yes, I thought that was the idea. Oh, well.


(On camera): This bold process was about more than painting the walls and cosmetic change. Behind the striking artworks, lies a building that has been renovated from top to bottom. To reflect Denmark's wider goals of greater energy efficiency.

(On camera): Now, we are in the palace.

PRINCE FREDERIK: When this palace was changed into what it is now, a livable modern palace. They understood that this is a young family, that it has to live and spend the rest of the days in this palace, and thus it has to be updated to modern standards, also with regards to green technology.

All of the radiators, for example, and the whole heating system was changed. We contained the energy consumption as much as we could. There was new coating on the pipes and thus we could take a way 700 meters of piping that was put in 50-60 years ago.

QUEST: Do you have something against furniture?


(Voice over): Even the artworks show case green technology.

(On camera): Oh, I see, they are mirrors.

PRINCE FREDERIK: Yes, this is a better way to combine what it is all about with the whole refurbishing of this palace, it was all about. At the same time, you have usable modern art. Art that shows a purpose, but here we also have the fact that the source, the light source, is LED lighting, which is obviously very-energy low.

QUEST: The rest of the world is learning about sustainability. We are still experimenting. You are on to Copenhagen 3.0, aren't you?


QUEST: It is in the DNA here.

PRINCE FREDERIK: It is in the DNA, in the fact that in the `70s, when the first oil crisis kicked in, Denmark really had to think radically in those days. And we already turned to alternative energy sources. And this is what this palace is a symbol of right now.

That you can combine an old 18th century palace-or house, if you wish- with a modern standards in green technology, which are not particularly visible, but they are here.

QUEST: Signs of tradition, bold signs of change, and informal signs of normal family life.


(on camera): A great deal of care and thought went into the renovation of the Frederick VIII Palace. It says something not only about a young royal family, but also about the progressive nature of this city and country where they rule.



DEFTERIOS: Welcome back.

I'm John Defterios.


And here are your headlines.

The International Monetary Fund has its first female managing director. As expected, French Finance Minister Christine Lagarde, has been named to the post. She replaces Dominique Strauss-Kahn, who faces sexual assault charges in New York. Lagarde said in a statement, she is deeply honored and will work for economic growth and stability for all.

Lagarde faces steep challenges right now, including rage in cash- strapped (cash-strapped) Greece over steep budget cuts demanded by international lenders. Clashes broke out in Athens, with some protesters throwing sticks and rocks at police. Officers responded with tear gas. Lawmakers vote Wednesday on the unpopular austerity measures needed to keep Greece from defaulting on its huge debts.

The chief prosecutor for the International Criminal Court says Libya should hand over Moammar Gadhafi. The court issued arrest warrants for the Libyan leader and two relatives Monday. But Libyan officials say the court is nothing but a cover for NATO's military operation.

A wildfire is burning uncontained near the Los Alamos National Laboratory in Mexico. The lab has said there's no immediate threat, but federal inspectors have been called in to check radiation levels. A mandatory evacuation is in effect and about 10,000 people have left the arena already.

Well, as we mentioned earlier, Greek lawmakers are debating tough austerity measures prior to securing further bailout funds. Polls show three quarters of the Greek population oppose the measures and it's not hard to see why. Let's get you up to date on that.

There are tax rises for certain businesses and the threshold for pain income tax has been slashed. Public sector workers will be hit extremely hard by this. They'll lose up to two months in wages. Salaries will be frozen from this point forward. And there's a major sell-off of state assets. This includes a stake in the gas supplier, public gas companies, shares in Hellenic Postbank, toll roads, ports, railways and airports and stakes in casinos, golf courses and even the gambling company.

Well, Greece is hanging out the for sale sign. Let's take a look as we go to the library.

This has been a huge discussion right now. For sale, the bargain basement, everything must go. You see the protesters in Syntagma Square in Athens right now. Its battered economy and desperate need for cash might encourage buyers to drive a hard bargain. Is it really for sale?

How fast are we going to see these privatizations?

They're talking about $70 billion by the year 2015.

Ironically, as we see, the protests down in Syntagma, we see here in London Greek officials coming to lay out the plans for the privatizations.

Let's get a read now from Jim Boulden, who has that side of the story.


JIM BOULDEN, CNN CORRESPONDENT (voice-over): Willing sellers -- the Greek government says it can raise 50 billion euros selling off state-owned assets in the coming years. Greece is decades behind its European numbers when it comes to privatization.

But are there willing buyers?

The risks are high, the bureaucracy legendary. Yet it was pointed out at a London conference looking at Greece's privatization program, there is potential.

GEORGE GOURDOMICHALIS, PIRAEUS MARINE CLUB: I do think that things will come up for sale this year, maybe not to the extent that we are being told. I think it's a very ambitious plan, time-wise. But, yes, things are coming up for sale and I do hope that they take back from this conference a major theme, which is get something done fast so we can prove to those who are funding us and to the markets that we can push through this program.

BOULDEN: One of the men charged with selling assets was in London Tuesday. Though he would not speak to the media, he did vow to tackle the problems that have kept potential investors away from Greece.

GEORGE CHISTODOULAKIS, SPECIAL SECRETARY FOR ASSET RESTRUCTURING: Well, no one can admit a very large number of mistakes, there is no reason to cry over the spilled milk. We should face the facts and optimize from now on.

BOULDEN: But a lot still has to change in order to attract buyers. Investors say there needs to be a stable legal and tax framework, less red tape and a more open system.

NIKOS STATHOPOULOS, MANAGING PARTNER, BC PARTNERS: The image that Greece has is that it's not very transparent in its processes. That is scaring people from coming to invest in the country.

BOULDEN: Tourism may be the one sector Greece can count on for growth. But it was noted few major luxury hotel chains are there.

AREF LAHHAM, ORION CAPITAL MANAGEMENT: It's strange. They'd love to be there. We'd love to build it for them. But somehow, regulations don't allow you to do so.

BOULDEN: So, what's for sale?

Well, a lot of real estate, though not the island or the Acropolis, as is mentioned sarcastically, and stakes in utilities and more competition in energy.

GOURDOMICHALIS: We're talking about, first of all, extensive real estate in all sorts of forms. The old Athens airport is, of course, a major part of this. What has been built around the Olympics. We are talking about concessions or infrastructure projects, bridges, highways, motorways, etc. Ports, airports.

BOULDEN: Greece promised to speed up privatization in order to get those critical loans from the IMF and its European neighbors. How quickly it's able to sell off assets and not back down in the face of strikes by unions will be seen as Greece helping Greece in order for Europe to help more.

Jim Boulden, CNN, London.


DEFTERIOS: Now, let's get an additional viewpoint from the business side now on the path of recovery.

George Gourdomichalis is the president of G. Bros Maritime.

He's also the head of that Piraeus Marine Club that you saw in Jim's report.

We decided to call him back to ask him, is it really possible to get the thing through parliament and then what happens afterward?


GOURDOMICHALIS: I believe that the government will deliver the votes. I believe that they will deliver the votes. And I believe they will get it through. There is opposition, even within the party, the governing party. But I think that, in the face of the greater good or the greater fear of what the alternative is, they will deliver it.

DEFTERIOS: And it's fascinating right now. You know the criticism that the Greeks have signed on for too much, trying to make good in Brussels -- the austerity packages of $40 billion over the next four years, privatization of $70 billion. It's a huge promise.

Can they deliver against the promise?

GOURDOMICHALIS: First of all, it's not quite true to say that they signed on for it. I think that we have been -- we have placed ourselves in a position where we have to go along with what we are promising. It is a huge and ambitious program. I think that we have an issue of timing and it will be pressing and that's the only thing that concerns me going forward. It's not the ability to deliver. I think we can deliver. I just don't know if we can deliver in the time required.

DEFTERIOS: What's at the crux of this, that the public sector, for the first 10 years of the euro, was allowed to grow almost out of control, not watching the bottom line of what the government really was getting up to?

GOURDOMICHALIS: That's part of it. It's not only that and it's not only the first 10 years of the euro. It's 40, 50, 60 years of allowing the public sector to grow in the -- in the sense it has. And it's also allowing the wider public sector, as we call it in Greece, which includes all the private companies where the government has a significant stake, whether they be publicly traded on the -- listed on the Athens Stock Exchange, or private, for that matter. The public power corporation, telephone, the telephone corporation, the national petrol corporation, etc.

So that is definitely a large part of it.

DEFTERIOS: Well, you raise a huge point, because these are some of the companies that are going to be sold off or at least stakes are going to be sold off. And I was -- if I was a private investor, I would look and say, I don't want to inherit that nightmare.

Can the government make assurances that you can trim the public sector and that the workers and the unions will go along with this?

GOURDOMICHALIS: I think as concerns the -- what is called the wider public sector, so these companies that we're talking about, these companies are already operating in -- in the mold of a -- of a free market, in the mode of a private enterprise. They are -- they deliver profits. They deliver development plans. They deliver growth. And they have been doing so for a number of years. And we can look at the numbers. Most of them have transparent numbers because they're publicly traded on the stock exchange. So I don't think that's a problem.

Is there a problem with unions?

Unions are entrenched in their rights and some of their rights are out of date these days and they have to be changed.

DEFTERIOS: I want to get the view of the business community on whether it's realistic to go back into a drachma economy and leave the euro.

Is it really something that's being considered on the ground in Athens and Thessalonika?

GOURDOMICHALIS: I think it's more coffee shop talk than anything else. I mean I've had -- I've engaged in that discussion, as well, with friends. But I don't think it's a serious discussion. I think that there is very little chance, if any, of the Greek economy moving out of the European -- out of the eurozone. And I think that the danger is not only to Greece, but also for the rest of Europe. I think there is an issue of contagion over there.


DEFTERIOS: Once again, George Gourdomichalis.

He's the president of. Maritime, a shipping company based in Piraeus.

Well, China is one of the countries already invested in Greece. And its European spending spree doesn't stop there. We'll take a closer look at gin -- China's scramble and gamble for Europe, when we come back.


DEFTERIOS: China's state-owned shipping company, COSCO, already has a major stake in Greece's main port of Piraeus. Ties between the two countries might be about to get a lot stronger. Premier Wen Jiabao said today that China might be the buyer of sovereign debt in the troubled eurozone states, giving a helping hand to Europe overall.

The biggest contributor to Greece's bailout is also profiting from China. At the meeting in Berlin today, Chinese Premier Wen Jiabao and German Chancellor Angela Merkel signed deals worth -- get this -- $15 billion. That includes the building of two Volkswagen plants in China. China also placed an order for 88 Airbus A320 planes. The list price for the jets totals around $7.5 billion.

This comes a day after Mr. Wen and U.K. Prime Minister David Cameron signed $2 billion worth of deals right here in London.

Our next guest is the co-author of a report that says China's increasing investment in Europe is a game-changer and something we should pay very close attention to.

He's from the think tank, the European Council on Foreign Relations.

They say that China's direct investment in Europe is expanding. For the whole of 2006, it was just $1.3 billion. We've seen that number eclipsed in just the past few days, of course.

It's also been a big purchaser of European sovereign debt, as we noted. And while Europe allows China to snap up European companies, the same isn't true in reverse, according to our guest.

Jonas Parello-Plesner is the co-author of that report and joins me in the studio right now.

I have to say, it's a pretty high stakes game. And one would look at the tining -- timing of Premier Wen Jiabao coming to Europe during the Greek crisis and the IMF vote for the managing director and say this is not by accident, huh.

What do you think?

JONAS PARELLO-PLESNER, EUROPEAN COUNCIL ON FOREIGN RELATIONS: No. Of course, I mean this is part of what we're seeing as a picture of Europe fitting into China's plan of its nature of its new five year plan, where it needs Europe for high technology. It needs Europe in different areas, for -- for its next phase of its -- its own growth.

And we see this in different areas, where China is coming in. It comes in bond (INAUDIBLE), as you just mentioned. It comes in in investments. And it comes in in public infrastructure.

DEFTERIOS: Now, it's because Europe is so desperate right now, if I can be so candid, about in Greece, Portugal and Ireland, they really cannot say no to the terms that China is putting on the table because of the size of China's sovereign fund.

That's the reality today, isn't it?

PARELLO-PLESNER: That's part of the reality. There is this sort of running after bilateral deals. And part of what we are asking is sort of what about the reciprocity?

What about the symmetry in the relations, because Europe doesn't have the same type of access in China?

Basically, the Chinese Geely, the carmaker, can buy Volvo. Volvo cannot buy Geely. So some of these questions, with the new type of economic relationship between the EU and China, they come to the fore of what are our possibilities inside China.

DEFTERIOS: Let me ask you a fairly pointed question.

What's the motivation for China to buy European debt?

Do you think it's really diversifying the portfolio or is it to gain power in Europe that the Europeans cannot say no to right now?

PARELLO-PLESNER: Well, I mean, looking at the amount of the stakes that China has taken in U.S. Treasury bonds, there's nothing inherently wrong with taking a huge stake in another economy. The fact, in Europe, that we are a different setup, that we have a common currency, but we don't have -- there are individual bonds. It does, of course, make the debt in country -- unquestionably Greece, Spain and Portugal -- feels as though they're largely independent and China is stepping in as the savior.

So, of course, for China, that's also part of a sort of improving political relations with -- with a given country.

DEFTERIOS: It's quite fascinating. I don't want to sound paranoid, but we said this about China in Africa and buying up the assets. They took a stake in the port of Piraeus in Athens. They're looking at Thessalonika. They've took a big stake in the -- the port of Naples in Italy.

Before we blink, China is going to have quite substantial economic clout on this continent.

PARELLO-PLESNER: That's right. I mean I -- I don't -- I see you mentioned Africa. I think there is similarities in the sense that the way of -- of using investment and -- and using the political level at the same time is relatively similar. And so there are -- I mean there's, in a sense, nothing wrong in China seizing up that Europe's crisis is also its opportunity.

But the question that we are asking is also could there be opportunities for Europe the other way around, as well?

DEFTERIOS: OK. That's what the WTO is for but it hasn't been that effective.

Nice to see you.


DEFTERIOS: Thanks for coming in and joining us.

Parello-Plesner joining us on the analysis of the Chinese report.

Well, investors across Europe are keeping an eye on Greece ahead of Wednesday's highly anticipated vote on austerity measures. The region's major indices finished higher, getting some support from a French plan to buy more time to deal with Greece's unsustainable debts.

Let's take a look at some of the numbers that we see across the board.

The London FTSE up .75. The Xetra DAX up nearly 1 percent on the day. The Paris CAC Courant up 1.5 percent or nearly. And the Zurich SMI up nearly .02 of 1 percent.

Nike soared as much as 7 percent after the world's biggest sports goods company beat earnings estimates. Overall, U.S. stocks are on the up, building on Monday's gains. Investors are hopeful Greece will solve its debt woes.

Overall, the gains near the high for the day, in fact, 12180, with a gain of 136.5 points. That's a surge of 1.13 percent.

There's been huge questions about whether we'd get this vote through in the IMF, huge questions about whether Greece can pass the hurdle tomorrow in the parliamentary vote, and, of course, whether the economic finance ministers of Brussels will pass their final package this next weekend, on Sunday.

Well, the outlook is looking cloudy -- well for Microsoft, at least. But that's a good thing, as the IT giant launches a product it hopes will help in the competition with Google.

We'll hear from Microsoft chief executive, Steve Ballmer, when we come back.


DEFTERIOS: Microsoft has unveiled its latest weapon in the fight against Google, with the launch of an Internet-based version of their Office software. The move into cloud computing could mean competition for Google Apps and could possibly bring back some business for Microsoft.

Maggie Lake talked to Microsoft's chief executive, Steve Ballmer, at the launch of that and asked him about the timing of Office 365 -- why now?


STEVE BALLMER, CEO, MICROSOFT: The thing we're really doing now is trying to make the Office 365 service more accessible, smaller businesses, new collaboration capabilities like videoconferencing and, you know, our proposed acquisition from Skype fits into that.


BALLMER: So we're trying to push the -- the theme. But, you know, we already have more people using Office services in the cloud than anybody on the planet, more paying customers, anyway, with our Hot Mail service and its interrogation with Office. We've got more free customers than anybody on the planet.

LAKE: Right.

BALLMER: Good competition, but we're driving fast.

LAKE: Is this a -- is this a niche product for those customers who want cloud capability, who have been asking for it?

Or do you see the majority of Office users migrating to this?

BALLMER: I see the majority, over the next several years. I see the majority of customers, business customers adopting it. Now, you'll have a back end cloud service in Office 365 and then people will be using it. Either the front end will be in the browser or it will be in those traditional applications that people know and love, that they'll be talking and managed through the Office 365 service.

LAKE: How does this change the business model for Microsoft?

Because one of the advantages for customers, we hear, is that it's more cost-effective for them.

So how does that change your business model?

BALLMER: Yes, I think it's a great opportunity for the customer -- it's win-win from a business model perspective. Customers no longer are buying the servers to support these applications. The customers don't have to operate them. So we get a chance both to extend our footprint and our business opportunity and save the customers money.

LAKE: So more...


LAKE: You need more customers?

BALLMER: No, no.

LAKE: You wish...

BALLMER: No -- well, it would be nice to have more customers. But we get to do more for each customer. Today, we'll sell you the software and you're on your own. Tomorrow, we're selling you this. We're selling you the software and we're providing the operations, we're doing the management.

So our total value add is greater. You ought to be excited about paying us somewhat more and you can still save money. It's one of those things where the technology permits customers to save money and the vendors who provide the technology to actually make more money. And we're excited about that.

LAKE: Why -- why do you think there's a perception that Microsoft hasn't been doing cloud?

Because you -- you pointed out Hot Mail. But there is that perception out there, that you're behind in cloud.

BALLMER: Hard to understand. I mean Hot Mail, we have half of the world's in boxes around Hot Mail. We have about, you know, maybe 50 percent, 100 percent more customers than Gmail. So we're not -- not newbies.

If you look at business e-mail, there's -- the number two can't be seen from where we are, whether it's on the cloud or whether it's on premise.

LAKE: How important is the success of this for Microsoft?

Because you've had a growing, you know, chorus, some activist investors saying it's time for you to step down, it's time for you to resign?

How important is this?

And is that going to affect the decision, whether you stay or not?

Why not pass for the time if this is a perception problem?

BALLMER: Office is our biggest product. And Office 365 is its future. It's where Office meets the cloud. So of course it's very important to the company. We have a -- we have a $20 billion plus business in Microsoft Office and it's going to be fantastic.

LAKE: And what do you say to those -- those people who say it's time to pass the baton?

BALLMER: I say it's time to embrace Office 365.


DEFTERIOS: That's a pitch.

Steve Ballmer there with Maggie Lake in New York.

Well, governments have come knocking on Google's door more frequently, seeking people's private usage information. That's according to Google's transparency report, which comes out every six months.

But in the latest report, for the first time, Google is revealing what percentage of user data requests they've complied with. In all, Google says it received 27,625 user info requests from 26 countries last year, those with less than 30 go unlisted in this process. And they say government had a 60 percent average success rate for receiving that data it asked for during the last six months of 2010.

The U.S., by far, is the most active and successful solicitor of private information. I'm not sure if that's so comforting. They accounted for about one third of all government requests last year -- 4,601 requests in the second half of 2010.

Let's take a look at what this really all means.

What was the compliance by the United States?

So 4,600 requests. Compliance of 94 percent by Google in that process. Very, very interesting.

We thought it would be also interesting to check some of the BRIC countries that are involved here.

Let's go to the number two, and that is Brazil. Obviously, the size of the market is big. We had 814 requests coming in. The compliance there, 76 percent. Google owns Orkut, one of the most popular social networking sites in Brazil. And, of course, that's prompted the requests and the number that we see there from Brazil.

We also thought it would be interesting to check another BRIC country. At number three, we have India coming in -- 1,699 user data requests, 79 compliance. In this case, at, we've posted a link to a site where you can interact with the Google transparency report and see the numbers for each country listed.

The beautiful face of Richard is in Athens tonight.

Before we leave, let's get an update from Jenny Harrison, who's standing by at the CNN International Weather Center -- Jenny.

JENNY HARRISON, CNN METEOROLOGIST: Hey, John, I've never heard him described as beautiful before, but there's a first time for everything.

I'm going to start talking about your weather across there in London, actually, because my goodness, it had a bit of an impact on Wimbledon this Tuesday.

Look at the satellite. We've got two main areas of weather. One across the southeast, really, much of Eastern Europe, an area of low pressure which has been spinning there for the last few days. And then out toward the west, all of this is a line of very ferocious thunderstorms that really have been going on, producing some very strong winds, also some hail in some areas.

You can see this very, very evident line here across much of Central and Northern France. But also, for a time, across the southeast of the UK. And, of course, that does mean they were coming through as Wimbledon was actually in play.

Now, in actual fact, of course, on center court, they will just shut the roof. But it was so noisy, the rain and the thunder outside, and the rain, of course, on the roof, that it was making it very hard for the players to actually play their match. They couldn't hear the ball. It was very hard, indeed.

Right now, I've got quite a bit of cloud in the picture, but at least the rain has cleared out of the way. So visibility, once again, is very good.

And now that we've seen the back of this line of thunderstorms across the northwest, it will be very nice for the next few days. The temperatures back down to the average, at around 20 Celsius, and cooler, of course, again, in the overnight hours.

But it's a very, very warm picture across Europe. You can see here, Tuesday's highs, the record highs there, 35 on the highest in Madrid. That's where the heat will stay. The thunderstorms, John, they're not going that far in at the southwest. But another day of very strong thunderstorms across much of Western Europe as we go into tomorrow.


Thanks very much.

Jenny Harrison in Atlanta.


I'm John Defterios in London for Richard.

"PIERS MORGAN TONIGHT" is just ahead.