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Texas Banker Allen Stanford Sentenced to 110 Years for Ponzi Scheme; Dow Up in Choppy Session; Mixed Results for European Markets; Merkel Says Germany Cannot Fix Eurozone Crisis Alone; Spanish Bond Yields Hit 7 Percent; Italian Borrowing Costs Cause for Concern; All Eyes on Greece; Europe's Future; OPEC Members Divided Over Production Levels; OPEC Meeting; Dollar Slipping

Aired June 14, 2012 - 14:00:00   ET


NINA DOS SANTOS, CNN INTERNATIONAL HOST: A hundred and ten years in prison. Allen Stanford is sentenced for running a $7 billion Ponzi scheme.

Record high borrowing costs a low point for Spain.

And in Greece, the parents forced to give up their children because they just can't afford to look out for them.

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

Good evening. The former billionaire Allen Stanford has been sentenced to 110 years in prison for one of the biggest financial scams in history. Stanford was convicted of stealing more than $7 billion from investors in a long-running Ponzi scheme.

Maggie Lake now joins us from New York to find out exactly what this means. So first off, Maggie, remind us exactly how this Ponzi scheme worked.

MAGGIE LAKE, CNN INTERNATIONAL CORRESPONDENT: Well, Nina, they say that based out of the Cayman Islands, he was in a traditional way bringing money in, saying that he was investing it, and really just funneling it toward other businesses. A typical pyramid scheme, much as we've seen with these sort of instances recently.

Hundred and ten years sounds like a lot of time, but it's actually half -- only half -- of what the prosecution was actually asking for. It still means that he is going to spend his entire life in prison.

Stanford himself addressed the court today, as did the judge. The judge, by the way, calling this one of the worst financial crimes ever.

Allen Stanford, for his part, spoke for about 40 minutes in what people in the court described as sort of a rambling address professing his innocence, saying that the was a scapegoat, that it was really the federal government who destroyed his legitimate businesses, and that is the reason that investors are out all of this money.

This case has been going on for three years, an extraordinary end to what has at times been a very bizarre case. You may remember at one point, Allen Stanford appeared beat up when he was in jail. At another point, he seemed to be fueling rumors that he was some sort of operative for the CIA, of course completely unfounded rumors.

And then, he became addicted. He was declared unfit to stand trial because he became addicted to anti-anxiety drugs while in prison. So this has had a lot of twists and turns, very frustrating for investors, who've been sort of waiting for this day of justice. A lot of them say that he absolutely destroyed their lives.

Now, we have to remember, Allen Stanford -- and you see him wearing those orange overalls from prison -- very different from the lifestyle he used to lead. At one time, he was considered one of the world's richest men with a net worth in excess of $2 billion, led a very lavish lifestyle.

He's not as much of a household name as Bernard Madoff, interestingly, which you'll remember is serving jail time for his own Ponzi scheme, but Stanford was well-known, especially in the world of sports, which some of our viewers may recognize him for. He spent a lot of money sponsoring cricket tournaments around the world. Of course, that is all over now. He is in jail.

He was ordered, as part of the sentencing today, to forfeit $5.9 billion. That is largely seen as symbolic. He is assumed to be broke. That's certainly what he says.

But there is $330 million sitting frozen in bank accounts. That's more realistic. The federal government here will try to go after that, but because of the legalities, it's probably going to take years to try to claw that back for investors.

Part of the reason, Nina: Allen Stanford will be appealing this, most likely with a public defendant, since he doesn't have -- seem to have any money left to pay a legal team. Nina?

DOS SANTOS: Yes, Maggie, you mentioned Bernie Madoff, there. He's still getting 40 years less than Bernie Madoff got. I think he got 150 years, didn't he, for that one?

LAKE: Yes, that's right. And the judge didn't explain why he didn't go for the whole 230 years. One has to assume that either way, this is -- this means life in prison, so perhaps there were mitigating circumstances we don't know about, 110 years is still an awfully long time, it's not likely he'll even see parole for this. He's going to spend the rest of his life in prison.

And again, the real -- the real tragedy here is that very unlikely that most of those investors will be able to get their money back. Or if they do, it'll be a small fraction of what they thought they had, Nina.

DOS SANTOS: OK, Maggie Lake, there, bringing us the latest on Allen Stanford and his sentencing.

Let's have a look at how US markets fared in this session. It was something of a choppy session for all the Dow Jones Industrial Average, but as you can see, it's managed to post a gain of around about 116 points at the moment.

What we're seeing for these US markets is, largely speaking, disappointing data on the one hand coming out on inflation for the world's largest economy.

Also disappointing jobless claims data, but that has been fueling sentiment that the Federal Reserve, the central bank in the US, may now step in and start printing money yet again. So a lot of this is on the back of optimism, we should say, rather than the hard data that's been printed so far.

Let's have a look at how things fared on the European markets, because it was a decidedly session for stocks in Europe. The main indices in places like London and Frankfurt, as you can see there, ended the session in the red,.

But what we saw with Spain and Italy, some of those peripheral eurozone countries, on the other had, see some pretty solid gains. This is largely as their banking sectors strengthened after the recent declines.

And particularly, if we take a look at UniCredit and Banco Popolare di Milano, those are the ones that are listed on the Italian markets, they both gained around about 5 percent, helping to boost the FTSE MIB, as you can see over there in Italy, up to the tune of 1.5 percent on the day.

When it comes to the Spanish markets, the IBEX, as you can see, putting on a gain of 1.25 percent. That was largely thanks to a jump of 4.3 percent for Bankinter shares. Whilst Bankia, which is the epicenter of the problem there in the Spanish banking sector, well that one was the exception to the rule. Its shares fell yet again by in excess of 3 percent.

Up next after this break, Merkel stands firm. We'll bring you all the developments on the eurozone crisis after this.


DOS SANTOS: Welcome back. Angela Merkel says that Europe faces a Herculean task to build a political Union. The German chancellor said that her country cannot solve the debt crisis alone and, as such, Europe must labor hard to make up for the failures of the past, and also to make up for them soon.

In a speech to the German parliament, the German chancellor warned that there were no miracle solutions here to this crisis, such as for instance the idea of euro bonds. And while Germany is ready and willing to help, Mrs. Merkel also cautioned that her country's powers are not infinite and should not be overestimated.

The chancellor said that she would have no problem with the European Central Bank playing a bigger role here. And she said that it was up to Europe to correct the mistakes of the past.


ANGELA MERKEL, CHANCELLOR OF GERMANY (through translator): It is our task today to make up for what was not done when the euro was created and to end the vicious circle of ever new debt, of not sticking to rules.

I know that it's arduous, but it's painful that it's drawn out. It's a Herculean task, but it is unavoidable. Everything else would be window dressing and would lead us to even more problems, maybe not tomorrow, but certainly very shortly.


DOS SANTOS: Around about 11 AM in Madrid time, well, Europe's problems got a whole lot more difficult. That's because the yield on Spain's ten-year bond crept over the danger level, above 7 percent. Yields have managed to come down slightly since then, but they're still around about a record for Spain's borrowing costs since it began inside the euro back in 1999.

Well, Moody's downgraded Spain's credit rating to just above junk status late on Wednesday night. As you'd imagine, that exacerbated the situation, but this is a situation that's also been affecting other peripheral eurozone countries, notably Italy.

Take a look at that. As you can see, the ten-year yields in Italy have eased off slightly, but an auction of three-year bonds today show -- saw some sharply higher borrowing costs for that nation, too. Italy is now paying yields of 5.3 percent on its bonds when it issues them. That's more than a full percentage point higher than at a previous debt sale.

Al Goodman is joining us now, live from Madrid to talk about the ongoing issues that Spain is facing. So Al, 7 percent. That is considered the danger zone. How are people in Spain taking that news?

Another difficult day here in Spain, Nina. You were just here a few days ago, you see the mood, and the tension was really up this day as the ten-year bond got over the 7 percent point.

Of course, that's -- the danger is that Spain might be shut out of market funding and then have to turn -- it's already turned to a bailout for its banks, supposedly a limited operation. The government won't call it a bailout, everybody else does. And the 7 percent rate leads to fears that there could be a bailout for the whole country.

But the Spanish economy minister got right out there and he said let's calm things down, everything is under control. Many people, though, don't think so. Nina?

DOS SANTOS: Seems to have had the adverse effect, doesn't it? That banking sector bailout. Al Goodman in Madrid, many thanks for that.

The Italian prime minister, Mario Monti, and the French president, Francois Hollande, say that they both want Greece to stay within the eurozone, and this Sunday's elections for Greece could decide this country's future within the single currency.

While speaking with Mr. Monti in Rome, Mr. Hollande said that the plight of the Greek people had to be respected.


FRANCOIS HOLLANDE, PRESIDENT OF FRANCE (through translator): The Greeks are suffering. It's them who must decide. We must respect them. They are making considerable efforts over several months for realizing the levels that have been asked of them, left by their government. And today, they must reaffirm their attachment to the euro and, at the same time, their commitments.


DOS SANTOS: Let's just bring you some pictures that are going on inside Athens at the moment. This is the main leftist party that is poised to gain a significant portion of the vote in Greece's elections on Sunday, Syriza. It's holding a rally in Athens.

Later on throughout the course of the show, we're going to be bringing you some pictures coming from Reuters about what's going on in Athens. There you have it, we have the pictures now that are going on.

And all of this comes after the radical leftist leader, Alexis Tsipras, has promised to form a government, quote, "for all Greeks" if he's elected, and he's been saying that his party represents the future of Europe and that has been what he's been saying at that very campaign rally in Athens on Thursday.

Here's a quote that he's been saying. "On Monday, we will form a government for all Greeks with Europe and the euro." That's what he's been telling his supporters ahead of Sunday's election. As you can see, he's speaking on the podium there, and those pictures coming to us from Reuters.

Remember that Syriza is a party that is fiercely opposed towards the terms of Greece's latest bailout. It wants to renegotiate them. That could have Greece kicked out of the euro. But on the other hand, he says that he wants to keep Greece inside the euro, so definitely a situation to watch.

Well, those elections in Athens hold the key to Europe's very future. I asked Bob Parker, the senior advisor at Credit Suisse how he thought things would play out two days from now.


BOB PARKER, SENIOR ADVISOR, CREDIT SUISSE: The situation at the moment, actually, is getting very serious, indeed. It's not just the fact that the economy has now contracted by over 20 percent since 2008 and the economic data shows, really, no letup in the recession.

What is also very serious is that if you actually look at the terms of the bailout program, Greece is very significantly behind on virtually all those terms. Obviously, tax collection has fallen because of the high level of unemployment.

DOS SANTOS: Do you agree with the terms of these bailouts, though, or is it a situation whereby we've seen too many countries having to embark upon austerity all at once. Is that the reason why it's so frustrating?

PARKER: Well, I think you've actually asked a very good question, because --




DOS SANTOS: Welcome back. Apologies for that. We went to a quick commercial break. We're try and bring you more of our interview with Bob Parker from Credit Suisse later on in the show.

And another thing that we're going to be talking about throughout the course of this show is the fact that OPEC has been undergoing a deeply divided meeting in Vienna today.

Now, let's just remind you exactly what OPEC is set to do. It was formed back in the 1960s by Iran, Iraq, Kuwait, also Saudi Arabia and Venezuela was an important key founding member. Its objective was to establish a stable price for the oil that its member countries produced at the time.

And some 50 years on, rising production by non-OPEC countries has actually threatened the cartel's dominance over this lucrative oil market. And as Jim Boulden now reports, the power to influence oil prices mostly lies with the group's biggest oil exporter.


JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT (voice-over): OPEC had so much control over oil markets 40 years ago, it could literally turn on and off much of the world's oil taps at will.

Today, OPEC does not have that kind of power, and it doesn't always see eye-to-eye on things like price and production levels.

TOM WALLIN, EXECUTIVE VICE PRESIDENT, ENERGY INTELLIGENCE: I think that's one of the common misperceptions about OPEC, that it's -- it has a common, collective view.

BOULDEN: After all, OPEC includes Iran and Saudi Arabia, two countries often at odds over regional politics. So, when it comes to influencing the price of oil, many people mean not OPEC as a whole, but Saudi Arabia. It's the world's biggest oil exporter.

UNIDENTIFIED FEMALE: Saudi Arabia still commands a huge importance in the market because when they come out and say they want a particular price level, the market realizes that if prices go below that for a sustainable period of time, the Saudis will take action.

BOULDEN: That price level at the moment is seen at between $90 to $100 a barrel for Brent crude. If it goes higher, OPEC members tend to ignore quotas and produce flat-out to take advantage of the price.

WALLIN: Well, I think this is a time when OPEC probably matters more than it does when prices are very high. At the moment, OPEC really -- or in the last recent years, OPEC has not been able to do very much about high prices and manage high prices.

But when prices are falling or when prices are lower, there is a capability for OPEC to work together to cut production to support the price.

BOULDEN: Putting less oil on the market can keep prices from falling further.

UNIDENTIFIED FEMALE: At the moment, they are producing well above what they are designated to produce. Last meeting, they said, "We will produce 30 million barrels per day." Today, they produced close to 32 million barrels per day. They can easily scale back almost 2 million barrels per day without even saying anything officially.

BOULDEN: The world's energy market is changing as well. Oil sands have helped the likes of Canada and the United States increase domestic output, while Russia, Norway, the United Kingdom, and Brazil are all countries investing in more drilling in ever deeper waters.

Still, OPEC pumps some 40 percent of the world's oil and has more than 75 percent of the world's proven reserves. While OPEC members Iraq and Libya are just now coming back to the markets.

Jim Boulden, CNN, London.


DOS SANTOS: John Defterios is our man on the scene at OPEC in Vienna, and he joins us now, live, from there. So, first of all, John, they were in there for hours. What's the latest?


JOHN DEFTERIOS, CNN INTERNATIONAL CORRESPONDENT: Nina, in fact, I had a flashback to the 1990s when they would meet for two or three days. In fact, they usually meet for two hours. They were in there for exactly five hours, and they decided to break without really having any concrete new agreement.

And in fact, most of the ministers came out not saying too much. I posed a question to the Saudi Arabian minister, Ali al-Naimi. He did not respond, nor did the UAE minister.

After coming out of the meeting, the Algerian told me they're going to roll over the agreement of 30 million barrels a day. The devil will be in the detail, because they're producing about 31.7 million barrels a day.

Saudi Arabia, the UAE, and Kuwait have put more oil on the market to bring the price down below $100 a barrel. And earlier, they said they're quite happy with that price. Let's take a listen.


DEFTERIOS: Is the price today alarming, that we've lost the $30 a barrel? Do you think this is a reasonable price for crude?

MOHAMED BIN DHAEN AL HAMLI, UAE ENERGY MINISTER: Well, the prices are reflective of the market fundamentals, and it's -- as it stands now, this is not bad. It's quite reasonable.

DEFTERIOS: You've been one of the doves to say that we should keep the market well-supplied because of the eurozone crisis and the tepid recovery in the United States. You've been a supporter of keeping more oil on the market.

HANI ABDULAZIZ HUSSAIN, KUWAITI OIL MINISTER: We think -- we don't think that the world economy at this stage, especially with what's happening in the European zone and the fragile recovery, if you will, in the United States, and what's happening, indeed, even in China and India. I don't think that the world can stand too much tightening that raise the prices up.


DEFTERIOS: That's the camp of doves, Nina, right now, Saudi Arabia, the UA, and Kuwait, who suggest we should try to keep prices below $100 a barrel.

But there is another camp entirely, led by the Iranians. We saw the Iranian oil minister, and through a translator, he said it's only logical that we should not see prices go down further, we should go back to its original target of 30 million barrels a day.

Venezuela is also in that camp. The oil minister told me, in fact, that if prices continue to fall, that OPEC should be prepared to call an emergency meeting to cut production right away. Let's hear his point of view.


RAFAEL RAMIREZ, VENEZUELAN ENERGY MINISTER: We have to be ready to have an emergency meeting or consultation to cut the production in order to maintain or level of price.


DEFTERIOS: So, we have a group that did not come out with a cohesive message. But Nina, it's worth remember that during real crises in the past, like the Gulf War in 1991, or Hurricane Katrina, or even recently with the Arab Spring, when they needed to make a big decision to put more oil on the market, going back to the theme that Jim Boulden brought about in his package, there, OPEC's been able to respond.

This time around, they did -- could not reach a consensus on this key issue as prices are falling again.

DOS SANTOS: Yes, the political brinkmanship is certainly one of the interesting sideshows to OPEC every time we cover it, isn't it, John? But what about the corporate view of OPEC's balancing act, here?

DEFTERIOS: Well, it's very interesting, in fact, because there was an OPEC seminar ahead of the meeting. I spoke to the CEO of Total, Christophe de Margerie, and Paolo Scaroni of ENI, the Italian energy giant, and they think that OPEC's overreacting in trying to protect this price of around $100 a barrel for North Sea Brent, that's a mistake.

They're in the camp that the world needs lower oil prices right now, and Scaroni was suggesting if you look carefully, we see demand in Italy and the rest of the eurozone dropping dramatically. Let's hear what he had to say.


PAOLO SCARONI, CEO, ENI: Well, from my perspective, eurozone difficulties translating to oil consumption going down, petroleum products going very much down. We're seeing in Italy in April consumption of petroleum products down more than 10 percent, which is something we have never seen before. And this is true all across Europe.


DEFTERIOS: So, that's the warning from the corporate world to OPEC, look, don't get too greedy. You had 240 days of oil prices above $100 a barrel.

On the final note, here, from Vienna, they're trying to elect a new Secretary-General to the organization. The Libyan will be leaving at the end of the year.

To show how far the camps are apart, Saudi Arabia and Iran could not agree on a candidate. They have a Saudi candidate, an Iranian, an Iraqi, and Ecuadorian. They decided to kick this can down the road. They'll make a decision later after further consultation.

So, a group that was cohesive for a number of years, there's cracks, here, Nina, between Saudi Arabia and Iran, the tensions in the Middle East spilling over to the Vienna meeting. Back to you.

DOS SANTOS: Certainly a fascinating backstory, as always. Great stuff. John Defterios, our man on the scene, there.

And currencies. There's one thing that those OPEC members don't need to worry about, because of course, their commodity is priced in dollars. As such, let's have a quick look at today's Currency Conundrum for you out there.

Occasionally, you may come across a US bank note with a small star on its serial number. Here's a question for you: what does that star actually signify?

Is it A, meaning that the note is from a special issue series? Is it B, a replacement note, or could it be C, the fact that the note is actually the property of the US Federal Reserve and, as such, is not for circulation. We'll have answer for you to that Currency Conundrum later on in the show.

Well, speaking of the dollar, it's currently slipping against most of the major currencies yet again after some mixed US numbers. What we saw was jobless benefits claims rising unexpectedly. Also, consumer prices dropping for the first time in two years.

And when it comes to the euro, that currency is actually rallying for a third straight session despite soaring Spanish and Italian borrowing costs. Do stay with us.


DOS SANTOS: Hello, and a warm welcome back. I'm Nina Dos Santos and this is CNN, and on this network, the news always comes first.

As such, the former billionaire banker Allen Stanford has been sentenced to 110 years in prison. He defrauded investors of some $7 billion in a long-running Ponzi scheme. His sentence is less than the 150- year term that was handed down to the former NASDAQ boss, Bernie Madoff for a similar crime.

Egypt's military rulers have just declared Parliament dissolved, and now they say that they have complete legislative authority over the country. The action follows a Supreme Court ruling saying that the law that regulated parliamentary elections was invalid. The military rulers also say that they'll announce who's been selected to help write the constitution this very Friday.

Well, it took a week, but UN observers have finally reached the Syrian town of Al-Haffa. A spokesman says that it appears to be deserted and also that it smells of death, and that most government buildings and stores have been burnt down. On Wednesday, the government said that it has reclaimed the town from, quote, "terrorists" and managed to restore security and also calm there.

An appeals court in Bahrain is releasing nine medics convicted for their role in the uprising against the government last year. The court upheld the convictions of 11 other medics. Five of those will be released on time served, and four can appeal their sentences again. The remaining two of the doctors are still at large.

British politicians have become too close to the journalists who report on them. Well, that's what the British prime minister, David Cameron, told the committee investigating media ethics in the UK today. He admitted to trying to win over different media organizations to back his party, but he still insisted that he was not trading polices for support.


DOS SANTOS: So we're just a few days away from the pivotal vote in Athens that could decide the future of the Eurozone as a whole. Let's now return to our interview with Bob Parker, the senior adviser at Credit Suisse. I was asking him how he thought things would play out.


BOB PARKER, SR. ADVISER, CREDIT SUISSE: The situation at the moment, actually, is getting very serious indeed. It's not just the fact that the economy has now contracted by over 20 percent since 2008 and the economic data shows really no letup in the recession.

What is also very serious is that if you actually look at the terms of the bailout program, Greece is very significantly behind on virtually all those terms. Obviously, tax collection has fallen because of the high level of unemployment --

DOS SANTOS: Do you agree with the terms of these bailouts, though, or is it a situation whereby we've seen too many countries having to embark upon austerity all at once? Is that the reason why (inaudible) --


PARKER: Well, I think you've actually asked a very good question, because the standard bailout package which the IMF has imposed on countries in the past generally those IMF packages actually have been very successful. More recently, we've had the case of Iceland, which I would argue after a painful three or four years is now successfully emerging from recession and from restructuring its economy.

The one feature of IMF packages in the past for countries in trouble has been significant currency devaluation. Now obviously in the case of Greece, we have -- we cannot have that while Greece stays in the euro.

And I think one key question is with an austerity package, do you, at some stage, reach a tipping point where the austerity becomes so severe that the bailout package fails? And in the case of Greece, I think one can put forward a strong case for saying that has now happened; we have reached that tipping point.

DOS SANTOS: So we've got this situation with Greece where it's impacting other Eurozone countries. We've now got Spain essentially receiving a bailout. That is a huge piece of news here. Where do you see that one going in combination with the Greek election?

PARKER: Well, I think one point to make is that people worry about contagion or risk from Greece if it defaults on the bailout program, if one way or another it is forced to leave the euro. But I think one point to make is that most private sector lenders, most notably the banks, where they had Greek exposure, have now written off close to 90 percent of their exposure.

So that actually reduces the contagion effect. Now you ask about Spain, that, of course, is a very different problem because there the problem was that we had a real estate bubble which has burst spectacularly. And, by the way, I think downside risk in Spanish real estate is still very significant. The --

DOS SANTOS: How significant, would you say (inaudible) --

PARKER: I would say the Spanish commercial and real estate prices, which, since their peak, are down somewhere in the region of 30 percent to 40 percent, I don't think it's unrealistic to say that prices could come down another 20 percent or 30 percent. And --

DOS SANTOS: (Inaudible) mean yet more writedowns to the banking sector after a bailout?

PARKER: And the banks -- and this is mainly the savings banks, mainly the kaisher (ph), they have exposure in excess of 300 billion euro to the real estate sector. And that bailout of 100 billion is required essentially to provide them with liquidity, eventually allow them to recapitalize so that they can make further provisions against those bad real estate loans.

DOS SANTOS: Either way we pitch it, it is an extremely important weekend, perhaps a pivotal weekend for the Eurozone as the whole future of this country, with the current number of members it has, what do you think? Do you think Greece will be out of the euro?

PARKER: I find longer term -- and by longer term, I mean taking a one- to two-year time horizon -- it is very difficult to envisage a scenario where Greece can stay in the euro. The economy, I think, will continuously struggle if it stays in the euro.

Short-term, the next three to four months, I think the European Union and the ECB, backed by the IMF, will probably give Greece a breathing space so that when we go into 2013, then a more orderly exit from the euro can be managed.

What we don't want is a shock (ph) messy exit from the euro. And you know, it would be -- if Greece is forced out of the euro, for example, in July, now that means a run on the banks; it means capital controls. It means severe economic and social disruption. It would be a disaster.


DOS SANTOS: Bob Parker there, speaking to me earlier on the subject of bad loans and bailout.

Well, the crisis in Greece is breaking families apart. Unemployed, homeless and desperate parents are being forced to abandon their children in orphanages. They say that it's a better option than starving on the street.

Matthew Chance spoke to one mother who gave up her son because she simply couldn't afford to feed him, and a warning to some of our viewers, they may find this report distressing.


MATTHEW CHANCE, CNN INTERNATIONAL CORRESPONDENT (voice-over): These are the youngest victims of Greece's economic despair. Abandoned not through lack of love but money.

We gained access to this orphanage in Athens where care workers say they've witnessed a surge in the number of Greek families unable to feed and clothe their children.

STELIOS SIFNIOS, SOCIAL WORKER: I think that is a first time for us - - and I'm working first with villages since 1982, so for a first time, I see so many poor families ask for help for their own children.

CHANCE (voice-over): Austerity and years of recession are literally breaking up families here.

CHANCE: Of course, there's always been orphans, children in care in Greece. But what's changed over the course of the past two years is this: previously, children in care came from problem families, parents who were drug addicts or alcoholics.

But over the past two years, that's transformed dramatically. The vast majority now come from families who simply can't afford to look after their children.

CHANCE (voice-over): Parents like Kassiani Papadopoulou, a single mother, unemployed and unable, she says, to care for her three children. We caught one of her rare visits.


CHANCE: Pleased to meet you. How are you?

PAPADOPOULOU: (Speaking Greek.)

CHANCE: (Speaking Greek.) Good to see you.

CHANCE (voice-over): Giving up this family, she told me, was painful. But in Greece's economic climate, still her best option.

PAPADOPOULOU (through translator): It's really difficult, really tragic for a true mother to leave her children. But when you understand they are not at fault and deserve a future, it's better to make a move like this than have them beside you without even a plate of food.

CHANCE: Who do you blame for putting you and your family in this situation? Do you blame the government? Do you blame the economic crisis? I mean, who do you hold responsible?

PAPADOPOULOU (through translator): For me, it's all those who govern. They've all looked out for themselves instead of the people. And the poor like us should be the responsibility of the state.

CHANCE (voice-over): But this is terrible social price of Greece's economic crisis, even for its youngest, most vulnerable, the state can barely afford (inaudible) -- Matthew Chance, CNN, Athens.


DOS SANTOS: We'll be right back after this short break.



DOS SANTOS (voice-over): Hello and welcome back. Let's get you the answers to today's "Currency Conundrum" now. Occasionally you see a star on a U.S. banknote serial number. Earlier in the show, we asked you what does that star represent?

Well, the answer is B, when a printing error occurs during a press run and renders (inaudible) unusable, replacement notes are issued, and the replacement notes have a secret of their own, using a star instead of their final letter (inaudible).


DOS SANTOS: To corporate news now, shares in Credit Suisse were some of the worst performers in Europe this session, falling by 101/2 percent in Zurich. All of this comes after Switzerland's central bank urged its lenders to abandon shareholder dividends in order to try and bolster its finances.

Well, the National Bank of Switzerland singled out Credit Suisse, saying that it needs more reserves to protect itself in the current risky climate.

Over in Finland, Nokia shares saw an even steeper decline, falling nearly 18 percent in Helsinki. Well, the phone maker says that it'll be cutting 10,000 jobs worldwide by the end of next year to try and reduce costs. It's been warning that Q2 smartphone sales will be worse than previously forecast with no signs of improvement in the third quarter either.

Let's get a check-in on the weather situation for you now. And some of you may well have noticed that the difficult weather in Europe is proving difficult for broadcasters like us, because every now and then it means we turn to black. Jenny Harrison is at the CNN International Weather Center to start out with that.

How bad is it looking, Jenny?

JENNY HARRISON, CNN METEOROLOGIST: Yes, there's another big storm heading in actually and it's the southwest of the U.K. This is the main (inaudible) of low pressure. There is, of course, still another system working its way eastward through Europe.

But this is the one that could (inaudible) be causing the problems. It's a fairly intense area of low pressure and very strong winds and thunderstorms. You can see very clearly here as they've been working their way across. A bit of a clearer spell across western Europe generally, though. As I say, the weather really is now coming from this next system. So working its way in from the southwest.

But ahead of that, we've still got some very strong thunderstorms embedded in that area of low pressure. And that, of course, has been causing a few problems again in the last few days and still warnings in place to Thursday till Friday.

You can see much of Ukraine pushing into southern Russia. That is where the greatest risk is from, again, those more severe storms with hail but also tornadoes as well. Now this is just showing the satellite and closer view to all the cities, of course, taking part at the locations for the Euro 2012. And right now in Gdansk, it has got (inaudible) chilly, 10 degrees Celsius.

And I have to say as well rain has been coming in. You saw the rain clouds just there. And so if you're going through the match report is about kicking off literally any moment, about 2 minutes if that away. And more showers continuing.

Now the rain is clearing up towards the north, so it'll be a while, but it should clear, and we're hopeful perhaps in about the second half you might start to see some dry weather, a bit cooler as well, maybe 10 to 12 at the best as that system clears through.

There's the next one, spreading all the rain across the U.K. Then again it'll push into western Europe and actually heading up towards Scandinavia as well. But the winds one of the big features again with this storm system again now push up through the North Sea and the Baltic Sea over the next couple of days.

That'll keep the temperature down on Friday, just 10 Celsius up in Glasgow, 17 in London, not bad further south; in fact, Berlin ahead of that system in between both systems, 24 degrees Celsius.

And I have to be saying that so all of that weather perhaps looking as bad as some of the storms has been coming through the south of the U.S. in the last few hours, in particular, Dallas.

And let's just quickly show you this second video, oh, (inaudible) this one, I've been told to stop talking, Nina. But I have to show you this, a golf course. And you think, well, what is this? Sort of gloomy mist? No, it was hail, a huge amount of damage, look at this.

It is just incredible to see, sent in by an iReporter. Now, imagine, it was baseball size, this hail. Now it's coming down from a height (inaudible) 30,000 feet. By the time it comes down to there --


DOS SANTOS: Impressive stuff. Jenny Harrison, (inaudible). We're going to have to leave it there on that -- on that downbeat note. But thanks ever so much for that.

And to our viewers, thanks for watching QUEST MEANS BUSINESS. "MARKETPLACE EUROPE" is next after this.


JULIET MANN, CNN HOST: Welcome to MARKETPLACE EUROPE in the city of London. I'm Juliet Mann. This is Lloyd's of London, the heart of the global insurance market, where risk taking is an everyday part of business. Last year, Lloyd's suffered at the hands of catastrophes of nature, earthquakes, floods and storms that resulted in losses of $800 million. It's an industry that's well versed in dealing with life's ups and downs.

MANN (voice-over): Coming up, the CEO of the French insurance giant AXA tells Jim Bittermann throwing Greece out of the Eurozone is not a solution.

HENRI DE CASTRIES, CHAIRMAN AND CEO, AXA: It would be opening the Pandora box, and opening the Pandora box is very tempting before, and very disastrous afterwards. Nobody wants to repeat another Lehman element (ph).

MANN (voice-over): And desperate times call for drastic actions as the fallout from the Spanish property crash takes its toll on the banks.

MANN: The Spanish property boom and bust has left Europe's fourth largest economy on the brink of collapse. Spain's banking sector is saddled with hundreds of thousands of unsold homes after the projects they financed went bankrupt.

These fat (ph) real estate loans are a huge blot on the bank's balance sheets, while the banks and developers desperately try to sell properties. Al Goodman reports from Madrid.


AL GOODMAN, CNN CORRESPONDENT (voice-over): Eduardo Bustamante counts himself among the lucky real estate agents in Spain's economic crisis. He says he's got a slow but steady stream of potential buyers for these new homes, although for competitive reasons, his company won't allow us to film them.

He's been in business 20 years, a business that took a radical turn after the decade-long real estate boom went bust, leaving hundreds of thousands of unsold new homes like this one.

The construction boom in its heyday looked like this, massive new developments across the country. At its peak, Spain was building more new homes than Germany, France and Italy combined.

EDUARDO BUSTAMANTE, REAL ESTATE AGENT (through translator: Before, selling a home was simple, because clients found you. They didn't worry too much about the price and almost everything sold. But not now. Clients aren't willing to pay the old prices and many have financing problems.

GOODMAN (voice-over): This building opened in 2008 at the end of the boom near one of Madrid's most exclusive neighborhoods. It has 60 condos.

GOODMAN: It took four years to sell half of the homes in this building, about 30. But now in just a few months, this new sales force is close to selling four more.

GOODMAN (voice-over): The main reason business is up? The prices have dropped sharply.

BUSTAMANTE (through translator): This is a very special home, exclusive. It's an attic duplex with a large terrace for about 384,000 euros.

GOODMAN: About 400,000 euros for this double floor attic?

BUSTAMANTE: (Inaudible).

GOODMAN (voice-over): That's half a million dollars, about half the old price. But realtors complain that banks are giving preferential financing to new foreclosed homes offered by the banks themselves. Bad real estate loans are dragging down the balance sheets of Spanish banks.

CARLOS ARENAS, SEGI ASSOCIATION OF REALTORS (through translator): The banks are competing with us. They are taking advantage of our clients, who decided to buy. They try to get him to change his mind and buy a different home. But with financing.

GOODMAN (voice-over): (Inaudible) Popular, one of the major banks offering steep discounts on its stock of homes, declined to comment for this story, as did Iber Caja (ph) Bank.

GOODMAN: This is a major shopping center near Madrid's airport. And right here in the shopping center package lot, over here is a housing fair. You can hear the loud announcement for this fair in Spanish. The Spanish developer's trying to get people who may have come here to buy only new clothes to go a bit further and buy a new home.

GOODMAN (voice-over): This long-time developer is trying to sell its own new homes built recently with its own financing. Yet some buyers are still cautious about the price.

UNIDENTIFIED MALE: (through translator): We have seen prices drop in recent months. They are still a little expensive, but they are starting to get closer to the level of our salaries.

GOODMAN (voice-over): So there are incentives galore. Here you could even get a brand-new car for free with a new home purchase. Bustamante also has add-ons for your house, a fully outfitted health spa to share, anything to get Spaniards to test the waters and make a down payment.


MANN: Al Goodman on the bricks and mortar that's weighing heavily on the Spanish economy.

Coming up after the break, we hear from the boss of the French global insurance giant, AXA.



MANN: Welcome back to MARKETPLACE EUROPE. The lutene (ph) bell here at Lloyd's of London was traditionally struck when news of an overdue ship arrived, once for the loss of a ship, twice for her safe return. It ensured that all the brokers and underwriters heard the news at the same time.

From humble beginnings in a 17th century coffeehouse, Lloyd's has grown into the world's leading market for specialist insurance. It's the place where members join together in syndicates to insure risks, anything from satellites to sports cars. The current uncertainty in the Eurozone is one risk that Lloyd's has factored in.

JOHN NELSON, CHAIRMAN, LLOYD'S OF LONDON: Although Lloyd's itself is not hugely exposed to the Eurozone because, first of all, our assets are held away from the Eurozone, roughly 16 percent of our business is in the Eurozone. So relatively limited.

But it would be the impact of a Eurozone crisis on the rest of the world economy that would obviously be of great concern. In real terms for Lloyd's, there is a -- obviously a wish that the Eurozone does manage to stabilize itself.

MANN: John Nelson, the chairman of Lloyd's of London.

Rock bottom interest rates and uncertainty over Eurozone debt crisis are posing challenges for insurance providers across the continent.

MANN (voice-over): The French-based company AXA has been in the insurance business for 200 years, and is now one of the world's biggest insurers, with a presence in 57 countries, the group employs 163,000 people serving over 100 million clients.


DE CASTRIES: Part of the business where we are seeing tensions for obvious reasons is the savings and asset management part of the business. It's still very profitable, but it's not what it was a decade ago because equity markets are very volatile, because long-term interest rates are very low.

And therefore this is making life more difficult for life insurance all over the place in the world. But insurance has multiple facets (ph). The -- you have the liability side of the business, where we take commitments with (inaudible) policy holders. We have the asset side of the business, where we have to invest very significant amounts.


DE CASTRIES: Hundreds of billions, yes. We've (inaudible) is quite - - is quite difficult with very difficult markets.

BITTERMANN: So where are you choosing to invest, then? Where are you putting your money?

DE CASTRIES: That's a good question. On a consolidated (ph) basis, we have approximately 80 percent of our assets in bonds, approximately half of it or a little less than have in sovereigns, the other half in corporate bonds, and 20 percent in other asset classes, equities between 3 and 5, real estate around 5, alternatives, cash.

BITTERMANN: (Inaudible) are running you through your mind right now about the situation (ph)?

DE CASTRIES: It's obvious now that there were some flaws in the euro construction at the beginning, because it has been, to a certain extent, putting the cart before the horse, because economic policies were not converging enough and the disciplines were not strong enough to allow for a really stable system for the long run.

BITTERMANN: Should the political leaders be considering that taking Greece out of the euro -- we've got some deadlines coming up that look like it's unsupportable?

DE CASTRIES: I don't think Greece is the only issue today. Second, I don't think that a Greek exit would solve everything. It's -- I think the situation is more complex than that. The -- we will see what the Greek elections are giving as an outcome.

But bluntly, throwing Greece out of the currency is not a solution. First, there is no process to do that. Second, if you do it -- I'm a great fan of Greek mythology. It would be opening the Pandora box, and opening the Pandora box is very tempting before, and very disastrous afterwards. Nobody wants to repeat another Lehman element (ph).

So my personal take is that we are going probably to bring the situation where Greece will be willing to stay. Some adjustments will have to take place. It's going to have a cost, but it's probably better than opening the Pandora box.

BITTERMANN: What's your worst-case scenario?

DE CASTRIES: The worst --

BITTERMANN: And then give me your best case (inaudible).

DE CASTRIES: The best case scenario is an outcome of the Greek elections where the moderate parties will win, where everybody will, I would say, sit and find some adjustments, not major ones, but some adjustments to the programs which have been -- which have been set, and at the very same time, a resolution of the Spanish banking crisis, because I think now the real thing we need to see is the effectiveness of the existing firewalls.

We'd like to be sure that you not only have the fire brigade, but that water is coming out of the pipe. I think the Spanish case is a good test.


MANN: Henri de Castries, CEO of AXA, talking to Jim Bittermann.

That's it for this edition of MARKETPLACE EUROPE. Join us again next week. Goodbye.