31/12/2012 World Business Report

Welcome to World Business Report. On a cliff edge - budget talks in

Washington fail to find a deal to stop damaging tax increases and

spending cuts in the US. We take a look at one of the

biggest challenges facing European leaders in 2013, to deliver on its

banking union proposals. The clock is ticking. When

politicians gather again in Washington for critical talks about

economic policy they only have until midnight to reach agreement

and prevent the US economy from tipping over the so-called fiscal

cliff. Republicans and Democrats are grappling over how best to

manage changes to tax and spending laws that come into effect on New

Year's Day. If a deal is not reached, nearly all households in

the US will be hit by a significant fall in the fall in the

economists warn this will lead to a recession.

We Gillard 20 York studios. Bring There are less than 24 hours until

the deadline. He does appear that lawmakers have so far failed to

reach a deal. Time is running against them. We have less than 24

hours to come up with something. As Harry Reid said, there remain

serious differences between that two. On the Republican side, they

have reached out to the vice- president Joe Biden. He is a friend

of the Republican senator. They hope that the two in get together

to come up with something. Reports say that the two will come -- will

preven prevent us from going off the

fiscal cliff. The size remain pretty grim. There is little hope.

The clock is running against them. A political will seems to be

lacking. What you think will be the likely outcome? There are

suggestions suggestionsmade not a see a deal happen by January 1st but

they may not necessarily be the doom and gloom that people are

speaking about in part because if they can come up with some sort of

agreement in the next few days or retroactive for. In other words,

they could undo the damage that is meant to ke meant to kery.

something that the market will be watching very carefully over the

next few days. The reason for optimism is because it becomes a

little bit little bit ter January 1st. If we go off the fiscal cliff, you

have these tax increases and spending cuts. Any deal that is

done after this, you could argue, is a spending cut. Given that

Republicans are opposed to tax increases, voting in favour of a

tax cut for the middle class may be more palatable. In the long-term,

is it thought that during this term for Barack Obama, his second term,

they make grass but the metal fully. Overcoming the problem of all in

debt and some of the spending commitments that they have. Those

difficult political questions. Do you think that they may be tackled

during this term? If you cannot tackle it under the circumstances,

it is hard to see how they could be tackled. There is a recognition

be dealt with. If you look at the spending commitments of the US

government government ular in areas the social programmes, they are the

costs -- bear the cost of the next few decades outpaces the revenues

of their taking in. Something needs to be done. He must look at the

difficulty that they have at the moment. The reason that America

finds itself in the situation is because they created this fiscal

cliff. This was in part because they are unable to read a previous

deal on deficits and how to address the issue. Here we are again. It is

hard to see how much progress can but certainly the two sides remain

so far apart that it will be difficult t difficult t I will talk to

about this in the future. The winner out a key to the world's

second largest economy. In China, many factory unexpectedly expanded

at the fastest pace in 19 months in December, boosting optimism that

the world's second largest economy is gaining traction. Fill us in on

what is going on in China. To this is definitely good news is

to end the year 2012 will. Today's figures were released by HSBC. The

number above 50 is showing above that growth is accelerated in

December. Many factory shows that manufacturing is higher then

compared to November. To November was the first time in more than two

years that this number went above 50 as showing signs that the

manufacturing sector in China is recovering. This is not just the

manufacturing sector but the been more signs that it has been

recovering because it has been growing at a slower pace of around

seven or 8%. That seems farce when compared to other countries but

from China's pointed you which have been growing at double digits for

many years, this has been a Asians for

been the key engine for Asia's growth. We are -- we are expecting

figures from the government on the manufacturing sector tomorrow. 1st

January, 2013. It should so -- shows signs of recovery. A good

sign of good news. One of the biggest tasks facing the

European Union in the coming year is to deliver on its far-reaching

banking union proposal. This is the ambitious plan to make the European

Central Bank chief regulator of the largest 200 or so lenders. It may

sound like a somewhat dull, technical move but it represents

the most significant centralisation of national financial powers since

the start of the crisis. Spring 2014, the ECB may have the

power to close banks that do not toe the line. It is a master plan

to take the reins away from national supervisors and breaking

governments governments and the banks that lent

it to them but also depend on them. Ministers from 27 countries have

had some success in reconciling concerns. Initially the ECB will

have no remit over German Savings Banks. None Euro-currency members

can now block rules that they do not like. The earning power of the

City of London is less likely to be damaged. The credit markets know

that putting the ECB in charge will not make a difference until their

art collective back-up funds to call upon. You need to establish a

deposit scheme that ensures that if one of the banks that go bump --

bust which was one of the problems that we are tried resolved but

instead the funds come out of a that it is all the more reason for

this adviser to begin. peripheral peripheral suffering

because it float. This is because the investors know that and euro in

Spain is what West of the euro in Germany. Th Germany. Thheir deposits

out. As this happens, based in Spain and Italy have to raise the

there. They have to remain -- raise rates to remain profitable. This

may be a star for cash and fault. The liabili The liabili

sovereign. The Governor of the Bank of England once remarked that banks

are global in life but National in death. Even with all the legal

framework in place, achieving a working banking union is going to

require enormous concessions from all concerned. Without them,

European Monetary Union could be stuck in its present, unstable

stage. It is quite the task ahead.

Newsweek has published its last edition on paper. From tomorrow,

the magazine will be entirely digital - available on the internet

and tablet computers. It is an attempt to reverse a slump in

subscribers and cut costs. But it remains to be seen - can

traditional print media, even established players like Newsweek,

really adapt to the pace and scale of the online world?

Japan is close from holiday. Elsewhere, it is a flat mixed