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Reuters Insider - Davos Today: Friday 2014

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Transcript (May be auto-generated)

 Good morning, everyone. Friday, January 24. This is Davos Today brought to you 
by the World Economic Forum and Reuters. I'm Axel Threlfall. Let's bring you the
headlines. Ukrainian anti-government protesters erect more street barricades in 
Kiev, fast opposition leaders emerged empty-handed from talks with President 
Viktor Yanukovich. Renewed worries over emerging market growth hammer the 
Argentinean Peso overnight, the Turkish Lira, South African Rand and Russian 
Ruble also hit hard. Iranian, Israeli and American leaders lay out often 
competing visions for the Middle East here at the World Economic Forum in Davos.
We're going to start with something a little bit quirky, as you know, all 
broadcasters, as all broadcasters now, I should say, tough putting on a show too
early in the morning. We thought we'd bring in a extra pair of hands. Here we 
are presenting our newest recruit with his uniform. 

We're kidding, of course, but London Mayor Boris Johnson was quite taken with 
our standard issue Reuters ski jacket. My interview with him, the full thing, is
going to be later in the show. You can hear him waxing lyrical about Europe, 
immigration and get this: whether he and David Cameron actually tell Deputy PM 
Nick Clegg where they're having dinner in Davos or conveniently forget to. Sir 
Martin Sorrell is my guest host. You're here for half an hour. Boris the PR 
mend? Well, we'll have a talk about that in a second, Sir Martin. But Sir Martin
Sorrell, WPP- 

If I was asleep before, Axel, after your introduction, I am certainly awake now.
There you go. With your half an hour, good, you can help me with some of the 
heavy lifting. Tony Fernandes from Air Asia is waiting in the green room to come
in. Absolutely. Alright, is Boris good PR for the UK and London? I think so. I 
mean, the thing about jackets is there's bikes. But Boris, I think, is good 
value. Now whether it's a value that plays across the whole of the UK, I mean, 
looking at potential political ambitions isn't out of the question. And I think 
actually political situation quite interesting because the IMF, just before we 
started Davos, upped the UK forecast. It looks GDP will be up about 2.5%. Yeah. 
For us, the UK was very strong last year, even through the fourth quarter and 
started reasonably well this year. 

So I think it's interesting that Cameron and the coalition go to the nation when
the economy is strong. Ed Miliband is taking the Labor Party to the left. Sure. 
The banker-bashing and the business-bashing which actually interestingly erupted
here in Davos. There was some off-the-record sort of behind the scene, quite 
nasty- Yesterday. Yes. Was there a column? You can tell us that. Some nasty- you
know, but some nasty quotes in The Times. I mean, the stuff that was in the 
Times. And I think Ed and his colleagues must be worried a little bit about 
moving the party left. 

The irony about all this is as far as the referendum is concerned or the EU is 
concerned, if you vote for Cameron and you get a referendum in the 17 at the 
moment, we think. Yeah. Whereas if you vote for Miliband, you don't get it. 
That's right. He was very, very diplomatic when he answered that question about 
Nick Clegg and whether they'd invite him for dinner here in Davos. But what did 
he call him? He calls him the yellow albatross. He has a wonderful turn with 
words. He does. Alright. Well, anyway, if you want to find out what he said, 
you've got to watch the show. That comes up a little bit later on. 

Emerging markets, I mentioned this in the headlines. I know you're worried about
some of the smaller emerging markets. I know you're worried about Europe as 
well. We'll come on to that later. But, you know, when we see the Peso being 
hit, I mean, it's down to levels 2002, the Ruble, South African Rand. Yeah, but 
I think- I was in South America actually at Christmas and New Year and I think 
that Argentineans were extremely worried about what was going to happen and what
situation the president will be in. And we've got elections coming up there, so 
I think there will be changes there. But, you know, you have crisis in 
Argentina, you mentioned 2002. Yeah. A list people will literally throw 
themselves out of windows in the financial district and you couldn't sell an 
apartment in Buenos Aires. So it's very cyclical. I mean, the problem with the 
Argentinean economy does go up, it cycles. My impression is this, I mean, this 
happened very suddenly, this sudden hammering of the currency. I know everyone's
worried about emerging markets. Here, everyone in Davos saying, "We're really 
worried about the emerging markets." You know, the developed countries seemed to
be the locomotive of 2014. Turkey has its issues as well as we know. Russia, I 
think a little bit more surprising because I am bullish on Russia and I think 
Russia plus Poland and plus Germany and Eastern Europe - you know, Europe is 
moving east too - poses, from my point of view, a big opportunity. So I think 
Turkey is sort of understandable. Given the external political uncertainties, 
we'll see what actually happens in terms of structure. 

We have several elections, we have a municipal elections in Istanbul, we have, I
think it's regional elections and then we have a national. Sorry, we have a 
national election and then we have the presidential election with Gul and 
Erdogan. Alright. Probably the two in power. Alright. Joining us on the set, a 
man who runs an airline happens to chair a football I support. And a football 
club, yes. Football club I support. I've got say that. One of those businesses 
is thriving. I'm afraid to say it isn't the football. Air Asia Chief Executive, 
Queens Park Rangers Chairman, Tony Fernandes. The football team is doing well. 
We do. We'll take it, but not thriving maybe. Tony, great to see you. Great to 
see you again. Great to see you too. It's been, I don't know, 20 years. Yes. 
Alright. The only reason Tony agreed to do an interview, by the way, with 
Reuters is because I am a Hoops member and maybe that's the reason people like 
Tony is successful- You'll have to explain to people what a Hoops member means. 
There might be some people watching who don't know what a Hoop member is. We 
support Queens Park Rangers football club, going back up to the premiership next
season, right? Absolutely. We're second at the moment. 

There you go. Plenty of games to go, still. Tell you, though, seriously, I mean-
The more interesting thing is you bought the club from Bernie Ecclestone. I did.
That's right. You're going to a panel on entrepreneurship this morning. I mean, 
I'd like to make this discussion more about that. There's been a call at Davos 
for this entrepreneurial revolution to solve the world's problems. Do you reckon
entrepreneurs could really fix the world's problems or is that a little bit 
naive? Well, I mean, my view is that there's a lot more coming down especially 
in the emerging markets that entrepreneurs can drive the economy much more. I 
mean, I know, I just listened to the two of you talking about the worlds of 
emerging market. Certainly, from my part of the world, the thing that's going in
our favor is consumption. It's the number of people and the number of people 
that are coming into the middle class. 

And so, the doom and gloom that you hear, I don't see in my business. I mean, we
are having record low factors, lots and lots of new routes. We're adding lots of
capacity. So I'd still say- And that sort of stuff keeps acting in businesses. I
mean, one day, fast-growth markets are heroes, then next they're villains. 
Exactly. But for us, we have to run businesses on real terms. It's real. It's 
real and it will continue. I mean, you're making some big orders at Air Asia. 
Yeah. Do you think that demand can keep up? 

Do you think that- I mean, your margins look pretty good, your cash position 
looks pretty good. Is that going to get the share price back up? Well, one hopes
so. I mean, here, as we've got bigger and better, as for normal in the market 
situation more people have come into the market. Markets overreacted a little 
bit and I've said, oh no, you know, Air Asia's margins are going to be real 
tight, profitability real tight. But I think we showed last year, we're able to 
withstand fierce competition. Yeah. But the main message here is that what I've 
been trying to tell people throughout from- you know, who asked me about 
emerging markets is, just ASEAN. The 700 million people. I started this airline 
12 years ago with two planes. We now have 150 planes and we have another 350 in 
order. That shows that consumption is high and I think that's the machine that's
going to get us out of this little bit of a negative thought. And you would say,
"lowest cost always wins," right? Right. 

Martin, what's- Just, can I ask him? Sure. You mentioned competition. I mean, 
miraculous what's happened at easyJet. Carolyn McCall has done an incredible 
job. Yeah. So what do you think are the keys to their success was? Well, I think
they- they have one airline who may be treated customers a little bit poorly. 
Yeah. We don't know which one, though. I can't mention it on national TV. You 
can say. And then, we seemed to be rapidly try to change our approach, by the 
way. We've seen some videos. And then there was another airline who said, okay, 
I'm going to treat them a little bit better. We always took the option. We've 
won the World's Best Airline five times in a row. I do think consumer always 
counts. We have our rules, but I think it doesn't cost anything to smile and 
give a product. What do you make of the brand? What do you think of the image 
of- Well, let's talk Air Asia first and then the whole Fernandes brand. Well, I 
think in the environment in which we operate and particularly post layman 
consumer, I think layman affecting companies more than the consumers. But 
consumers are looking for value. So you know, if you have an excellent product 
at an affordable price, you win. 

Yeah. And I think they're looking at value. I mean, you see that in the fashion 
industry, you see that in the retail industry. I mean, you see that everywhere. 
So I think value is- I think what Air Asia and Tony offer is value. And it's 
similar thing for easyJet. I mean, good service works well. I think what you're 
going to see now, interestingly, I mean, easyJet has ridden the fact that it's 
now catering to a high-yield passenger, the business traveler who maybe years 
ago shunned the low-cost carrier and just went for the flight carriers. We're 
about to hit that now. We started something called High Flyer just to try it 
out. 

And with our new terminal care, I think more and more people are going to- For 
you it's great because you move up. Correct. So we have this natural new bounds 
when we move into these new terminals. Who are you talking to here in Davos? I 
mean, you're doing these entrepreneurial panels but can you do business here? 
Absolutely. I mean, I have to tell as I was always a little bit skeptic at 
Davos. Yeah. Have you been- do you come every year? Being a low-cost man, I 
wouldn't say low-cost. Certainly not low-cost and that he's high-maintenance 
too. So you pretty know where you are in the picking order depending on what you
pay. Yeah, exactly. Who have you talked- and we're right at the bottom, by the 
way. Who have you talked to who you think you could do business with or you're 
now doing business with now? 

Well, this has been a very good- I mean, I have to say, you meet enormous amount
of people. You meet Sir Martin Sorrell. It's incredible, isn't it? Of course, 
yes. What more do you want? The highlights. You justified the whole cost of 
coming to Davos. Yeah, a bit of abuse at QPR. It's his first time today. That's 
why you come. I don't want to go down that painful route either where they chop 
and change every two weeks. But for me, this trip has been good. I mean, I'm 
going up to India. India has its all sorts of problems. Many people are 
negative. Again, I come from the perception of it's great to go in when people 
are negative about something because there's an opportunity. Well, I mean, you 
say that. But let's just talk about that. 

I spoke to -- and who's at the Chamber of Commerce. I mean, this election looks 
like it's going to make things so unstable there. Not unstable but- I mean, a 
deadlock. Nothing's certain there. Well, I was talking to somebody, one of the 
Indian -- if I can call them that, talking about the challenge- He believes that
Modi can where the BJP get 180 to 200 seats. And therefore, I have a very strong
position in the coalition with the other parties including Congress. I mean, 
Congress has in the polls, not done well so far. Although- But I thought I'd 
just throw something else in your thought. 

I mean, I've come from Southeast Airline 11 years ago, been through coup de 
etats, revolutions, unstable governments. Economic cycles. All kinds of, you 
know, high oil credit crisis, you name it. But we've always grown. Right. And 
sometimes, the economies, sometimes the news, etcetera, makes things to be much 
worse than it actually is. If you go out there, there's one billion people in 
India. If you can't make it work and provide a product, then there's something 
very wrong. So I see a massive opportunity there whatever the political 
situation is. Yeah. There is a massive opportunity for its youth as well. I 
mean, its links to political because the person who wins the election or the 
person who does best or the party that does best will be the one that 
understands the social media. Absolutely. Right. I've got to stop you there. 
What kind are you talking about? I know you've got a guess to this panel, Tony. 
Thank you so much for coming by. Pleasure. Really appreciate it. QPR, number 
one. Are you going to be at the Burnley game? I am. Will you be there? I will be
there. Right. That's a crunch game, six-point game. Absolutely. Tony, great to 
see you. 

Great to see you. Take care. Now, investment banking is easy when the central 
bank cash figures are on the deals plentiful. The CEO is bullish but with Fed 
tapering arriving at last, will M&A flow slow down? Here's what Bank of 
America's top investment banker, Christian Meissner predicts. Well, I think the 
first point is that even though tapering has begun in the US, there's certainly 
at this point no shortage of liquidity and I anticipate that that will continue 
for some time. Having said that, we also anticipate that overtime, the fixed 
income markets in particular will become less liquid and rates, of course, have 
already risen and will continue to rise. And that will impact deal activity in 
that sector but nonetheless, well-structured, well-executed deals certainly are 
still getting done in very significant size. Christian, you oversee IB, you 
oversee M&A, you've got capital markets and corporate banking. 

Which one needs the most attention from you in 2014? Well, I think we are trying
to build a balanced business, so it's not a particular focus on one. I would 
say, historically, the M&A practice has been the one that needed the most 
attention. We've made a lot of progress of that in the last couple of years. But
to your earlier point on the debt markets because it's becoming perhaps a little
bit less active in the interest of having other things to fall back on, clearly 
the M&A and ECM areas are going to be areas of big focus and that's certainly 
one place we're going to be spending a lot of time. Sir Martin, I'm going to 
bring you back in. I know Mr. Ricche is on the set from ENI and we'll talk to 
you in a second, sir. Thank you very much for coming in. 

I was speaking to Rick Gelfond from IMAX yesterday, he has this sort of country 
Davos index theory, 2007, everyone bullish, bam! 2009, the world will never 
return to- 2008 everybody was bullish as well. There you go. 2013, people are 
bullish again. That really was what worries him. Is there anything in that? I'm 
not so sure it's contrarian. It's a sort of lack of ability to forecast. 
Actually it's more- I think there is an issue here, I mean, we've been directed 
by the powers of me sort of think about the future and the brilliant, essential 
issues of it, inequality, youth unemployment, healthcare, welfare, climate 
change. And I think we tend to take our eye off of all of the- for example, the 
turbulence in the fast-growing market, currency markets overnight. Yeah. 

The Ruble and the Peso, etcetera. I think actually starts to get your attention 
again on some of the issues. I did a panel with Axel Weber. Yeah, I saw that. In
fact, I want to talk about it. And he was quite negative. I mean, I think you 
said- because he's extremely good. But what he did was to bring people down, 
back to reality that the Eurozone crisis which is one of the greatest ones we'd 
still go down, is not fixed and the banks, certain financial institutions will 
come under pressure under the asset test. So I think Rich is right in the sense 
that you have to get the balance right, and we tend to overbalance. And because 
of theories or because we're told to think about the longer-term- and I think 
you have to think about the short-term too. Okay. 

Let me bring Giuseppe in here. Giuseppe Recchi, Chairman of ENI. Very nice to 
have you on the set so early. Thank you. Thank you very much for coming in. 
Let's just pick up on the back of what Sir Martin was saying. Axel Weber in that
panel, I think he was saying one of the big worries is also these parliamentary 
elections in Europe. And given where some of the these fringe parties are going,
the instability that will bring politically and economically. How much of a 
worry is that for you? I was in the same panel, actually. So it was pretty 
interesting because the thing- the situation looks calm now because every nation
is trying to put together some reforms, but it's still on a business plan. So 
you need to see ours executed. And Italy actually is pretty active in the 
program but it hasn't started yet strong things. It started to create condition 
for attracting foreign investment that's why probably the spread of the treasury
bonds have been through the country. So it's giving a good sentiment to the 
investor to come back. But still structural reforms will have to come. 

They are in sight. So the next month will be crucial, I think. Yes. In your 
sector, on the back of Shell, which everyone seem to gasp at, people were 
talking about this new cycle of- or analysts are talking about this new cycle of
when oil firms cut capex to preserve earnings and cashflow. Is that happening at
ENI as well? Are we seeing the same thing at your company? It's a general trend 
and the reason is that oil and gas is time by time is getting difficult to find,
so technology is playing a big role in there. 

So looking forward, companies need to be equipped financially to look after this
big project, which are coming. And again, the geopolitics or problems around the
world are also affecting the industry and so you see some of the companies 
having some issues. Yes, coming back to Giuseppe's comments in relation or 
Recchi's comments, I think the biggest risk certainly from my perspective is 
clients doing exactly what you and Giuseppe just talked about which is cutting 
spending in order to make numbers. Now, the energy industry from our point of 
view - and we have very important clients in that including a minor part of ENI 
but we want it to be more a major part – but this issue, this lack of 
willingness of managements and boards and nonexecutive directors to take risk 
particularly post like- this comes back towards what you're saying about Lehman.
Lehman really impacted corporate attitudes and what we're seeing and the reason 
the earnings season is a bit squiffy is that people are saying in order to make 
my numbers I have to cut costs. Instead of focusing on the top line, making the 
investment, it's linked to the emerging markets thing, right? If you believe the
emerging markets are in trouble, you're going to get extremely cautious. I have 
to ask you about Iran. 

I imagine you're at this meeting with your majors and President Rouhani. Yes, I 
want to. There were a couple of meetings. I mean President Rouhani was- very 
good news here because the fact that he came really showed the commitment of the
country to become business-friendly, to open to international business, to 
attract investment and the promise is pretty attractive because there were a lot
of resources to- Absolutely, you were one of the last to pull out. Are you going
to be one of the first to go back in? Actually, we're one of the first to be in 
because our company has a long tradition in the country. We've been there. 

And again, we could stay but sanctions have stopped the business but of course 
we're very interested to start again as soon as- So any- people will be looking 
opportunities there? I heard a lot last night that the question or the number of
centrifuges is going to be a key issue and then it may not be a positive result 
though because the Iranian is taking a very, very hard stance apparently in the 
negotiations and the discussions about cutting back on the numbers of 
centrifuges. And this issue about whether nuclear capability or peaceful means 
intension or not is critical important. So I think there are a lot to go but you
know Giuseppe's right. 

I mean the fact that he came, the fact that Netanyahu as well, but there's a lot
of cynicism on the American side; of course as well as- And I hear you yesterday
and yes, that cynicism comes through very clearly. That interview by the way is 
coming up on the show. Shale gas - let me talk to you a little bit about shale 
gas just to finish up with - clearly, having a big impact in the US. I know 
you're doing something in Poland. How much of an impact do you really think this
is going to have in Europe? I think shale gas play pretty good in the US and 
they don't play exactly for the good in Europe because it's really change the 
business model and then actually sent to failure the original 2020 program 
because now CO2 is increasing because coal is such so cheap that power station 
running on coal are running on capacity while it does run in gas or not. And so 
emissions are increasing. Top cost of energy is the key issue. So if Europe 
wants to be back, it needs to have a competitive capacity in the Indiana field 
because that's how really companies can compete and now there is a gap. The 
energy cost in Europe is two times more than US. Gas cost in Europe is three 
times more and so unless we fill that gap I think we'll struggle for long. Okay.

Giuseppe Recchi, many thanks for joining us this morning. Thanks very much 
indeed. Thank you very much. Tesla boss Elon Musk, one of the notably names not 
here in Davos this year; his cars are though. Vehicles arriving in Davos 
required by the World Economic Forum to meet very strict environmental standards
which of course the zero emission electric Tesla Model S does easily. So too 
this electric motor from Nissan, the Leaf, seen here getting a quick charge. 
Here from the Renault-Nissan boss Carlos Ghosn going a little later on in the 
show. I'll talk with Sir Martin about Elon Musk and Tesla as well in a moment. I
want to remind you to send in your thoughts for today's guest. Tweet using the 
#DavosToday. So it was the Google Party in Davos last night. 

Not sure whether my next guest got an invite. We'll ask him in second. EU 
Competition Commission Joaquin Almunia just about public enemy number one in the
Google boardroom after he warned the company needed to settle or face big fines.
Is that fair to say that? No, I am not an enemy of anybody. But did you get an 
invite to the Google Party? Did you get an invite to the Google Party? No. You 
didn't. Okay. That was last night. I really don't know about that. I didn't 
attend. Okay, okay. Are you meeting Eric Schmidt in Davos? I'm meeting Eric 
Schmidt during the last three years so many times. And where are we now with the
Google issue? Well, we are at a decisive moment on our investigation that 
started more than three years ago. The second round of Google's proposals was 
not satisfactory. But now, we are at the last opportunity to find an agreement; 
if not, we will not continue our investigation with the traditional statement of
objections. But hopefully we can reach an agreement. I think it's better for 
Google. It's better for us. 

It's better for the competitors. It's better for all those who wants certainty 
in this market. Or balance in the market? Well, this market is a new one from 
the antitrust perspective, only the American federal commission did an agreement
that many people rejected. And we are trying to reach an agreement that many 
people will receive in a positive way. I mean but Google has, if you think about
the digital market being not just about search but about mobile and social, and 
video and display, I mean Google has a leg in each of those and of course gives 
it a very, very strong position. Yes, we are now investigating the Google market
on search, vertical search services. We have also some information regarding all
the areas of Google's activities, for instance Android ecosystem, but we are 
only investigating right now the search. You passed the merger of the number two
and number three. We're number one in the industry and there's number two and 
number three are merging. 

And one of the criteria that they tried to push up- But we are not enemies. No, 
no, we're not. You're my number one friend. Have you two, by the way, just 
quickly. Sir Martin, have you two spoken about this on the conference? No, no, 
no. Okay. Good. Have that conversation here. It's an interesting one. But you- 
Partly one of the reasons I think you passed it was that you thought it might 
give more balance to the new minimarket and that was one of the claims. But the 
interesting thing is- More balance in your market. Yes, well, more balance for 
our clients in negotiating with the new media right now. So Facebook, Google, 
Twitter, etc. The interesting point, however, is that for the traditional media,
one of the things that surprised me about the process, not the decision - don't 
get me wrong - but the process was there wasn't more concern from the 
traditional media outlet. So for example, newspapers and magazine, who are under
tremendous pressure, and in my view newspapers have a quite tough future because
we're not felling trees and distributing newsprint. And I think that was 
interesting. So they tried to deflect the attention to the new media markets 
whereas the real tension is with the old media. The old media, in any case, are 
very active in the Google investigation. I do want to move the conversation on. 
But I remember when we spoke in October about this, Sir Martin, you said that 
you were quite surprised that the regulators were letting so many conversations 
happen between Publicis Omnicom at that time. Well, I think the regulatory 
process to be fair, I mean we think that strategically and structurally, -- is 
challenged. And actually interesting point, we're taking seven to one in terms 
of people since the announcement at the senior level. But the interesting thing 
is they did a good job on the regulation because- with the exception of China, 
they still have China to go through. 

Okay. We'll talk about that. We've got Maurice Levy speaking with us a bit 
later. Let's take about manipulation in the FX markets. I got to ask you about 
the banks. I don't know how much you're going to tell us. But a number of banks 
have settled. A number of- you call these- I think I'm right in saying leniency 
applicants - these banks that say, look, we want lower fines in exchange for us 
giving you information. How many banks are on that list of leniency applicants? 
Are they all scrambling to get on the list? We had decided based on a settlement
with some banks, the LIBOR and EURIBOR cases of collusion around the 
manipulation of LIBOR and EURIBOR benchmarks for interest rate derivatives. We 
have an investigation open in these same cases with three banks plus one broker 
that didn't want to settle, and they have the right to do so, and we have the 
right to continue our investigation. We have an investigation also around the 
collusion and manipulation on the Swiss Franc -- derivatives and we have 
received information on forex markets. How recently have you received that 
information? When was the last time you received information on forex? In the 
last month. We are receiving information but I cannot disclose. We have not yet 
decided if we will formally open an investigation on this. Is this FX 
manipulation a lot bigger than you thought it was? Well, it's impressive how 
much this benchmarks were manipulated. Interest rates benchmarks, probably 
foreign exchange benchmarks and maybe other benchmarks that are also relevant 
for our economic players and in very important markets. We have also some 
interest in possibility of manipulating prices of some raw materials. Are you 
talking to some of the big banks here in Davos or is this one of these very 
sensitive times where you've got to stay well away from- Certainly not casually 
at the Google Party. This kind of very interesting conversation take place in 
Brussels. 

Alright and if you do speak to Eric Schmidt again, do let us know. Joaquin 
Almunia, many thanks for talking with Reuters. Thank you very much. Good 
morning. Thank you. Right. You're watching Davos today. 28 minutes past seven. 
The headlines coming up. Ukrainian anti-government protesters erect more street 
barricade in Kiev after opposition leaders emerged empty-handed from talks with 
President Viktor Yanukovych. Renewed worries over emerging market growth 
hammered the Argentinean Peso overnight. Turkish Lira, South Africa Rand, the 
Russian Ruble and the Korean Won also hit hard. 

Iranian, Israeli and American leaders lay out often competing visions for the 
Middle East at the World Economic Forum here in Davos. We'll have some thoughts 
later on. Let's get a final thought though. It's amazing how- it's alright. I 
was- apologies for that. It's amazing how time flies and we've got to let you 
go. But let's get some final thoughts from you, Sir Martin. You talked about how
you're all being asked to look forward on some of the big issues. Yes, long term
But let's face it and I put this to –- really what you're being asked to do is
admit that huge mistakes were made in the past, that capitalism if you like 
needs to be recalibrated, a lot needs to be recalibrated, a lot of the big 
Davosian themes need to be recalibrated and then you can move forward. When we 
talk about the rise of the middle class- so I think the middle class is forecast
to go from about two billion people to about five billion by 2030 and we've had 
the rising middle class in Brazil, Russia and in China. We had a discussion in 
the open forum yesterday on the Swiss television as to - for an hour and a half 
– as to whether capitalism had failed or not and the effects of capitalism and
I think what you had to say if you look at the long term again, taking the long 
term but looking backwards, is capitalism has been a great engine for growth 
particularly bringing all these people out of rural poverty into you know I mean
some urban distressed but urban strength and wealth. 

And I think the real problem is since 2008 and when we had the financial 
collapse or potential financial collapse in 2008 which we didn't see coming and 
which could have caused major, major catastrophe if the authorities have not 
worked out the plan but has resulted in cheap money. And actually cheap money 
has exacerbated the inequality issue and the unemployment issue. And looking at 
the future, technology, 3D printing, cheaper energy resources, America- which 
will put America in a very- the brand of America will be in a very strong 
position. It will be a G2 world in my view; it will be China and the US. What 
the biggest problem I'd say is not- doesn't employ labor; it employs capital and
replaces labor so the unemployment, and the unemployment policies are very 
different when I left school. It's a focus on inflation and the evils of 
inflation rather than the evils of unemployment. Brand of America, strong; how's
brand Obama? Well, I mean he's having a tough time. So not good? Very tough 
time. Well, and the big question is, between now and the next election is to- 
what more can he get done? 

I mean we still- we're -- ones as the US deficit- they pushed the can down the 
road, the debt ceiling. They pushed the can down the road again along the time, 
thank God, than they did before but it's still not fixed. So that issue- and you
know my personal is that we'll see Hillary Clinton in the White House in 2016. 
Well, I know this- right, this is a complete guess. Senator McCain, talked to us
by the way, he's probably going to run again, yesterday so- Did he really said 
it? Yes. Well, I think probably Hillary wins. Okay. Sir Martin, it's been a real
pleasure. Thank you so much. We've enjoyed this. And hopefully we do the same 
thing again next year. Sir Martin Sorrell from WPP. Now, Iran, on Thursday, 
stepping up efforts to thaw relations with the west. The aim to persuade 
investors to return to the sanction-hit country which we just talked about with 
ENI. Addressing the World Economic Forum in a packed auditorium, President 
Hassan Rouhani said Iran was determined to negotiate a full deal on its nuclear 
program which he reiterated was peaceful. I strongly and clearly declare that 
nuclear weapons have no place in our security strategy and that Iran has no more
motivation to move in that direction. Israeli Prime Minister Benjamin Netanyahu 
not impressed by Rouhani's comments, saying it was imperative to avoid a 
bi-national state in comforting Israel and the Palestinians but also to prevent 
an Iranian proxy state. He meets with US Secretary of State John Kerry later. In
the world, to make peace you say you need two to tango. In the Middle East, you 
need at least three. I'm ready for peace. I'm ready for a real, secure, genuine 
peace. And I hope that President Abbas is ready too. US Senator John McCain a 
little more upbeat on Rouhani's rhetoric when I spoke with him earlier. This 
whole issue of the nuclear weapons will come down to what is already- in my 
view, apparently Rouhani has said they will preserve the right to enrich. That 
is unacceptable to many of us in Congress. Do you trust Rouhani? If they abandon
the right to enrich, I do. If he insist on having the right to enrich, of course
not. He bragged himself about when he was a negotiator for the Iranians about 
how he deceived the West in those negotiations. So you don't trust him? Of 
course not. 

Is there any reason for us to? What do you say to those- But let me say, when I 
say I don't trust him, but I'll be more than happy to see a period of time 
elapse of serious negotiations. If it can reach an end where they agree to 
dismantle, where they agree to stop the centrifuges which they haven't, and 
abandon the right to enrich, then I'll be the first to vote for it. But it's not
going to happen. You can watch the full interview a little bit later on. Renault
among the firms thought to be eyeing a return to Iran. Reuters Julian 
Satterthwaite asked Company Chief Carlos Ghosn if he could confirm Davos talk 
that he had met with Iranian President Hassan Rouhani. Well, first, it's not 
true. I didn't meet because I think it's premature to talk to the officers of 
Iran before the sanctions are completely lifted. I don't think today it would be
serious to engage into any discussion as long as you can chip apart, you cannot 
get paid, there are plenty of problems around the Iranian operation. So I think 
first, we need to make sure that there is an agreement and those sanctions have 
been lifted. Then after this, ourselves and a lot of other car manufacturers 
would love to contribute to the development of Iranian market, which is by the 
way already, even with the sanction, the largest market in the Middle East. Do 
you anticipate assembling cars there again? Oh, yeah, hopefully. I mean, I'm 
optimistic on the fact that we're going to get the solution between Iran and all
the countries- the Western countries today putting the sanctions on Iran. When 
this will be done - I can tell you this - the investments will flow. Time scale 
roughly at all? 

When do you expect- I hope that this will be solved during the year 2014. We're 
hearing rumors that an agreement can be done within three months or six months. 
We'll upload that because immediately after an agreement has been reached and 
sanction lifted, investments are going to flow. Do the Iranian still owe you 
money? Oh, yeah. No, we have lot of money today in Iran that we cannot transfer.
They are still there. Right, so you couldn't operate in the country again until 
the transfer payments issue are sorted out. How would they pay you? Yeah, I 
mean, it's not only about turnovers. Any company cannot operate in Iran because 
as long as you cannot make transfers of money and you'll always have a flux of 
parts, machinery, equipment - anything that you're importing in Iran - if you 
can't get paid, you cannot launch an operation. So we- but we consider that this
is potentially a great market for the car industry. And we want to be able to 
launch again the operation immediately when the sanctions are lifted. 

Carlos Ghosn speaking with Julian Satterthwaite. Now, central bankers like to 
worry about inflation, growth and exchange rates. But there are three other 
things on their mind this year: tapering, tapering and tapering. Among those 
waiting to find out exactly what Janet Yellen has in mind, Choong-soo Kim. Your 
third year in a row with us. Welcome back, many thanks for talking with Reuters.
What is your view on tapering? What should happen? When is it going to happen 
and how concerned are you by the market's reaction? Well, as you know, there are
actually two different effects of tapering particularly on emerging market 
economies. Many of the people are currently concerned about the negative 
spillover effect of tapering on emerging economies. And of course, it depends 
upon the macroeconomic fundamentals of the emerging economies but we know that 
there several emerging economies that experienced capital outflow after tapering
began. But at the same time, I'd like to note that there is also a positive 
spillover effect. What I mean is that the US began tapering means that the 
prospect for economic growth is assessed to be bright. So there are both 
positive and negative spillover effects of tapering. Let's talk about your 
policy: rates, 2%; inflation is at 1% or less. Sure you're not going to tell us 
when you're going to ease but to aid the inflation target, help bring down the 
value of your currency, that would an easing would surely be the next thing on 
the cards for you. Well, those are all interrelated. And as of now, inflation 
rate turns out to be lower than our target of the inflation. We are doing 
inflation targeting and the range is 2.5% to 3.5%. And this year, we project for
the inflation to increase by about 2.3%. You talked about- yeah, okay. Not just 
the 1% or so. And it's a little below the lower bound of the target but during 
the second half, we expected the inflation to rise about 2.8% which belongs to 
the range. And regarding the exchange rate, I think the level itself is 
basically determined at the market policies. But government authorities 
including central bank of course do pay attention to the high volatilities in 
the exchange rate. You've mentioned previously that there needs to be a limit in
the currency's rise especially when you look at the impact it's having on the 
export market. What is that limit? Well, the limit means that the volatility- 
the size of the volatilities that can be, through an extent, containable. If 
volatilities become too big, then they will impact on the economy and a lot of 
negative effects will be made. How much stronger does the Won need to get before
you move? Well, as I said, we don't pay that much attention to the level itself.
We do pay attention to the volatilities because we want the capital market and 
financial market stable. And so we don't have any specific level in mind. Do you
worry about a competitive devaluation war with Japan? Well, we all know how 
grave consequences the competitive devaluation will bring. And so we know that, 
we shouldn't rely upon competitive devaluation to maintain competitiveness. 
Monetary policies should not target inflation- I'm sorry, should not target 
exchange rate but we do target inflation. Governor, many thanks for coming and 
talking with us again. Thank you, yeah. We'll see you next year, thank you very 
much indeed. Yeah, bye-bye. Right, let's get an update of key sessions at Davos 
Today. Reuters' Mia Reakes has the details for us. Friday sees UK Chancellor 
George Osborne discuss the options for ending monetary stimulus. He'll be joined
by Bank of Japan Governor Haruhiko Kuroda and Central Bank of Brazil Governor 
Alexandre Tombini. At the same time, the heads of BP and GDF Suez will give us 
their thoughts on a potential global energy plan. Also in the agenda is a 
session on what the world can expect from Germany's new coalition government. 

Wolfgang Schaeuble will be interviewed by Peter Limbourg, DG of German 
international broadcaster Deutsche Welle. Tech fans can get their fix with a 
discussion on how market leaders and entrepreneurs can spark innovation. It will
be introduced by Yahoo! CEO Marissa Mayer. If the next 11 list of emerging 
markets is your thing, there's a discussion of what their future holds with 
French Finance Minister Pierre Moscovici, Turkey's Deputy Prime Minister and the
President of Rwanda. And finally, a group of the world's Nobel Prize winners 
will gather for an informal conversation on the key economic challenges for 
2014. The theme in Davos this year of course is reshaping the world, a bold 
mission. We caught up with Virgin Group Founder Sir Richard Branson, asked him 
what needs reshaping most. We have to be cleverer in resolving conflicts. If 
Ukraine descends into chaos and becomes Syria, how sad. Now is the time - with 
only four people killed, still too many - when it's got to be resolved. Richard 
Branson who caught up with yesterday. Now, world leaders urging Ukraine 
President Viktor Yanukovych to diffuse two months of unrest. German Chancellor 
Angela Merkel is angry. France's Francois Hollande wants rapid dialogue. And US 
Vice President Joe Biden phoned Yanukovych Thursday to warn him that failing to 
deescalate the standoff with protestors could have consequence. US Republican 
Senator John McCain joined the protest in Kiev last December telling the crowds,
"America is with you. I am with you." I caught with them on set earlier to ask 
what role Russia is playing. Look, we all know what Putin is up to. He wants to 
restore the near abroad. That's why he pressure Georgia, Moldova, The Baltics 
and the Ukraine is the crown jewel of the old Russian Empire. And so he put that
pressure on obviously because he wants them to join the customs union. Let me 
tell you what this is really all about. Yeah. 

Ukrainian people want to be part of Europe. Right. That means EU. They don't 
want to be part of Russia. Yanukovych is a corrupt leader. His son, the dentist,
is a billionaire, okay? Right. So- go ahead. How does this end? What do we need 
to do? I hope that it ends with negotiations for a new election- And you're 
hopeful? I'm always hopeful but I don't think there's any doubt that facts on 
the ground are deteriorating. Okay. Your agenda very full with international. 
But let's talk domestic to finish this up with. 

Who's the future of the GOP Party? Who's the up and coming leader? We talked 
about Chris Christie a while ago. Who do you think it is? I think Chris Christie
can still survive this if there's another shoe to drop. He's been a very 
effective Governor in a Democrat state. But I think our governors deserve- our 
successful governors- Republican governors deserve a lot of attention coming up.
It's way too early to predict. But I think the point is that we have to have a 
candidate that can reach across the aisle. Right. 

And one of the issues that we Republicans need to address is comprehensive 
immigration reform. Right, right. If we want to win Hispanic votes, we have to 
address that issue. What are the chances of Congress getting anything done 
before the midterms? I am guardedly optimistic that we will move forward with 
some immigration reform. What about tax reform? What about minimum wage? I don't
think so. And it's just shameful. Why we won't address tax reform piece by 
piece? You know what it is? It's a copout. We say, "Hey, let's get rid of this 
egregious-the tax subsidies for sugar. Oh, no, we have to have comprehensive. We
have to do a comprehensive." Why? Right. Why not get rid of the most egregious 
ones one by one? What about you? What are you going to do? 

Go down to the old soldiers home and sit in a wheelchair until someone comes in 
and blows the cavalry charge. Seriously, what are you going to do? Are we going 
to see you run again? Yes, but I'm not up again until 2016. But I'm very 
seriously considering it. If you want to see more of that interview, do check it
out on www.reuters.com. Now one big M&A deal are waiting regulatory approval, 
the $35 billion advertising mega merger. We were talking about it just now with 
Martin Sorrell and Joaquin Almunia. That merger to create Publicis Omnicom of 
course. 

Maurice Levy who'll be Co-CEO of the firm explains the deal's rationale to 
Reuters' Jon Gordon, also how he plans to spend client cash on new media like 
Facebook and Twitter. The problem is not where we are putting the money, the 
problem is where the money is the most productive for our clients. This is not 
our money. We are the custodian of the money of our clients and we must make 
sure that we are working for our client in the most effective and the most 
efficient way. Maurice, tell me about this. You're calling it a merger of 
equals. I've been through one of those, it's not always that simple. Are you 
making a French advertiser here? Are you making an American advertiser here? Are
you complaining about your merger? I'm not complaining. 

I'm just saying. I'm just asking. No, we are making a merger of equals. We know 
it is difficult because it's so easy to have one of top of the other. It will 
not be an American company, it will not be a French company. It will be a 
European company and we have elected to be registered in Amsterdam. So we will 
be a Dutch company. So we'll start by learning the Flemish language, the 
Netherlands language. Maurice Levy talking with Jon Gordon. 

Now chances are you've never entered a Kaggle contest. Unless you're a data 
scientist, you may not even know what one is. I certainly had no idea, I've got 
to tell you. But these competitions crowdsource some of the world's finest minds
to come up with big data solutions. Reuters' Nigel Hilditch met CEO Anthony 
Goldbloom and asked him about some of the most exciting ideas. With General 
Electric we've done -- predicting flight arrival times, sort of taking where an 
airplane is in the air, where its position is and how much congestion there is 
between its current position and the airport that it's going to be landing at 
and where the weather is in between and when it's going to arrive, and this is 
to power a model in cockpit software. We've also done with Allstate predicting 
insurance claims or predicting based on somebody's history of insurance claims 
when they're next likely making insurance claim. 

And perhaps the most outlandish thing we've done is taking high school essays 
and using those high school essays and building algorithms to grade those high 
school essays. So there's some pretty good incentives for people coming up with 
these solutions, right? People have got jobs out of this. Yes, there are lots of
different incentives. The biggest prize we've ever paid out is $500,000, so 
that's a pretty good incentive. We have companies like Facebook and Yelp who 
actually post these challenges not in order to get a solution but in order to 
attract the kind of talent of their companies that they would like to attract so
the really good talent builds up. So you've decided to focus on specific 
industries now alongside these competitions. Tell us why you've decided to do 
that. We're going from the first wave of growth where- with competitions with 
work, with 20 Fortune 500s, we feel like we've come off creamed off the Fortune 
500s who are in a position to run these who are at the point where they're ready
to run these other challenges. So we want to broaden what we do to a wider 
audience. I want to talk a little bit about Davos and why you've come here. I 
know you're invited by the WEF, but do you come just because, why would you say 
no, or do you come because there's specific people that you want to meet and 
deals that you want to do? Davos has kind of got this mythical reputation. And 
partly I suppose I came out of curiosity, what's it all about. And I'll tell you
what, it's actually a phenomenal place to do business. Might big data be the 
answer to big problems in global healthcare? That was the question posed by one 
Davos panel this week. 

Sanofi Chief Executive Chris Viehbacher took part. He joins me now. Has that 
happened already or is that happening today? Well there's been various -- along 
but we have a major health summit which is a first for Davos. Let me ask you 
this, is health and the issue of health mainstreamed enough at Davos? It's 
really come up in the agenda this year. It's a big economic issue. We're talking
about 10% to 20% of GDP. There's a lot of concern around sustainability. 
Emerging markets are now moving to provide more and more healthcare. SO it's a 
big economic issue. How much of a debacle was Obamacare and a role out of that 
and the impact it's had on healthcare providers and the impact it's had on 
companies like yours? I mean there have been obviously some setbacks short term.
I think if you look at it medium term, you're going to end up with more people 
having insurance. 

I think the bigger question is what kind of insurance will they have. I think 
there are people who have good insurance who may end up with less good 
insurance. And there is a trend for some employers to think about perhaps just 
letting- giving people a lump sum and having to go to the exchange. That could 
be worrying long term. What is the big story in healthcare now? You teamed up 
recently with a German firm to find new antibiotics in the natural world. 
There's been a lot on the radio in the UK. I've heard this early in the morning.
Antibiotics, strains that are beating antibiotics now. We need to get drug 
companies out there to find some new ones. Is that the big one right now, these 
companies getting back into finding new antibiotics against infectious diseases?
Actually this space has just become extremely exciting in all aspects. When 
you're a big company, I think the biggest question for pharma has been, where's 
innovation coming from. Typically we've looked inside for innovation. The 
question is how you access innovation, not necessarily how you innovate 
yourself. But when you look at now the emergence of digital technologies with 
therapeutics, you're looking at immune therapies, you're looking at self 
therapies, you're looking at natural substances. And if you're able to access 
that innovation to a series of partnerships, I mean the horizon today is 
unbelievable. But what is the big direction for healthcare over the next decade?
Is it areas likes this? Is there enough money in it for companies like you? Or 
do you really need to target, say, mental health and other areas? Well we used 
to describe a disease by the symptoms. But increasingly we're describing a 
disease by cause. So if you think about asthma, you think about cardiovascular 
disease, on the surface you don't appear to have anything to do with one 
another. But if you look at the role of information for example behind that, 
then you start to see some commonality. So people will start working in 
information or they'll start working on immune diseases. And they can actually 
impact a number of different disease areas. And that's what we're really 
starting to focus on immunology for example, and because of our vaccines 
heritage, rare diseases is another big focus. Just to finish up with, your 
profits were down I think about 20% in Q3. You went shopping clearly. 

You've restructured internally. When are we going to see all this paying off for
Sanofi and the shareholder? Well I think the first of all there has been a nice 
payoff for the shareholder because the share price has doubled pretty much in 
the last three to four years. The results will really start to reflect the fact 
that we are at the other side of the patent cliff now. But Sanofi lost eight or 
nine major products over the last three years, billion Dollar blockbusters. And 
we have been transitioning from the old blockbuster model to a more diversified 
growth platform model. And I think the other big news in Sanofi is that we've 
been able to really now develop I think one of the top pipelines in the 
industry, largely biologics. Christopher, thanks very much indeed. Christopher 
Viehbacher from Sanofi. Every year at Davos the Crystal Awards celebrate artists
who not only excel in their art but also help to improve the world around them. 
Iranian born filmmaker Shirin Neshat is one of this year's winners. On today's 
Arts in the Alps, she argues that artists have a unique perspective that leaders
should learn from. Art is a particular type of voice that could be a type of 
protest. It could be a way of raising awareness. It's a way of inspiring people,
bringing hope, mobilizing people, provoking people without having a particular 
agenda. And so I think in time of political crises actually, we need artists and
cultures more than ever. Women Without Men is essentially played of a few 
individuals, a few women as they aim for an idea of freedom and independence, 
women that have an aspiration who leave behind their difficult past lives and 
look for a kind of a refuge, a kind of a new life, a new beginning while 
pursuing the country of Iran with aspiration for change, democracy and freedom. 
We have an access to the hearts and the mind of people in a way that no 
governments and politicians have. And because we are not biased, because our job
is not to convince them, to take a particular agenda, we're not trying to sell 
anything. So we are a conduit I think, and our voices are important. We'll look 
who's back at Davos. Coming up: Banking tycoon Bob Diamond was notable by his 
absence from Davos last year after losing his job at Barclays. This year he is 
back in the fold after launching a new African banking business. Bob Diamond 
walking around Davos yesterday. 

European banks are terrified what the ECB's upcoming Asset Quality Review will 
reveal about their balance sheets, right? Well not necessarily. Intesa San Paolo
Chief Carlo Messina telling us earlier it could be a boom for the healthier 
banks at least. The Asset Quality Review will be something like a turning point 
in the evaluation of the bank laws and the timing it will be possible to make a 
massive disposal of non-performing loans. Including Intesa? Absolutely. Joining 
me now to tell us if he agrees is the Chief Executive of Italy's biggest bank 
UniCredit Federico Ghizzoni. Welcome to Davos Today. The Asset Quality Review, 
what do you think is going to mean for the banking sector? 

A great opportunity. A great opportunity. Because it will give possibly the 
market to understand exactly what is the quality of the balance sheet of the 
European banks. So since the very beginning, I'm saying it must be a serious 
review. It has to be done with a set of rules. Obviously we'll have some banks 
having some maybe problems. But for the European banking system, it's merely key
step to look forward and to move forward. What about some of the midsize 
lenders? What is it going to mean for them? Could we, on the back of this, see a
new round of consolidation in Italy especially among the midsize lenders? Yeah, 
I believe so. I think for sure some banks will need some additional capital. So 
it's possible that we will start to see consolidation of debt level. It's also 
welcome from my point of view. In Italy we have many banks. So it's time to see 
some banks getting together. And do you think that consolidation, that will only
happen at mid level or do you think some of the bigger players can go into that 
as well? At this phase mid level. I don't see big banks going together. It will 
be interesting to see after the Asset Quality Review not in Italy per se but in 
the European scenario what will happen. But up to a time only locally, so 
domestically and midsize banks, in my opinion. Are you still planning to pay a 
dividend for 2013? We don't anticipate this news. We have accrued a dividend 
through the year so we see when will be the time to approve the numbers. But you
imagine a dividend will be forthcoming? Basically. Just a general question, I 
mean you're on a number of panels and one panel in particular, restoring faith 
in the banks. How far along are we in the restoration of faith in the system 
altogether, would you say? Well I think we are moving step by step in the right 
direction. Actually the new rules and regulations have been painful but again we
have a supportive bank in recreating trust. To me still the major problem for 
the banking sector is reputation versus customers. And this is where we have to 
work still quite a lot to get them their trust, their confidence. 

So rather than focus on regulation in UniCredit, we focus a lot on customers 
satisfaction and service improvement. And what specifically is UniCredit doing? 
And we are investing significant money in what we call securitization. So this 
is for the retail business. We are investing a lot in supporting the 
internationalization of our companies because I think that Europe is in a phase 
of not big growth but if you look at a couple of sectors growing quite a lot 
outside Europe. So we must keep to follow the customers up there. So a number of
initiatives, focus on customer satisfaction and with a strong target to improve 
ser
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