23/12/2016 World Business Report

A bleak Christmas for the world's oldest bank: Italy's Monte dei

Paschi requests a state bailout, after plans to save itself

Plus: It is a $660 billion relationship, but could Trump's

tough talk spell a costly trade war between the US and China?

If you are tuning in for the first time, stay where you are. I know it

is early in Britain. We have nine minutes and here is a fascinating

snapshot of all the latest in the world of business and money. Who put

that on the autocue? We are going to start in Italy. We have been

following this for weeks now. because in the last few hours,

one of the country's biggest banks says it will request

a government bailout. We are talking about Monte

dei Paschi di Siena. Its boss has been flying around

the world, desperately trying to raise money from investors

to keep it afloat. But late on Thursday the bank

admitted it had failed. After a late-night meeting,

the Italian cabinet has passed Let's give you some

of the background to this. Monte dei Paschi is not only

Italy's oldest bank, It was founded in 1472,

and became one of the country's most Fast-forward 5.5 centuries,

and things aren't looking A string of bad decisions has left

it with a pile of non-performing loans, bad debts that borrowers

are unlikely to pay back, This summer, it was singled

out in stress tests by the European Central Bank

as the shakiest of all 51 major It has lost nine tenths

of its market value this year. Deposits have been

flowing out of the bank. This week it warned the money

could run out within four months. The terms of this bailout could be

politically explosive. Under EU rules, private investors

have to suffer losses before Some 40,000 private

investors hold Monte bonds. On Thursday, people in Siena

were expressing their anger TRANSLATION: There has been a lot of

uneasiness, uneasiness at all levels. Firstly from an emotional

point of view, because Monte dei Paschi was the true daddy of the

city, and it has been robbed in a very traumatic way. TRANSLATION: I

really hope that Monte dei Paschi is able to save itself without the

state stepping in. Firstly, for the pride of the city, also because I

doubt the state can improve the situation. The State would not stay

in the bank. Siena has lost its bank and it will never be able to recover

it, so it is agonising. Jasper Lawler, senior market analyst

at London Capital Group. Great to have you here, thank you

for coming in at this ungodly hour on Friday. A lot of these private

investors, as you and I were saying before we came on, are pensioners.

This is going to go down like a led Zeppelin, surely? That is the big

points, the European Union require that investors take some of the hit

for taxpayers have to pay. And fair enough, really. Why these banks need

money is to pay off these are non-performing loans, they need

money to sell these non-performing loans to people who are Axa going to

use it so they can start lending again, but why should they have two

pay? -- who are actually going to use it. There has been a fudge

-a-rama in Europe. That is not all the investors, different kinds of

investors here, junior and senior bondholders. The junior ones are the

ones which will get hit. That is mostly the pensioners. And so

ordinarily they would just have to live with that, but obviously that

is politically toxic. You have the Five Star movement in Italy, which

would take advantage of their lost money. What they are going to do is

compensate those pensioners for their losses, the reason being that

those pensions were mis- sold in the first place. These pensioners should

not have been holding this kind of risky debt in the first place. Like

a PPI repayment, if you will. This is the third bailout for this bank.

Some would say when do you call it a day? On top of that, at this

particular period of time, this is one of maybe eight banks which

neither bailout at the moment. Absolutely. This is the third

bailout for Monte dei Paschi, and I would say it is the third time I

would say just let the thing go. Compensate depositors, make sure

they have money, make sure the pensioners are not at risk. But

every other investor, they won't like me saying this, but they took a

risk by investing in the bank and at this point it has shown itself to be

beyond recovery. Obviously these other banks are in trouble as well.

Very briefly, do big problems in Italian banks equal big goblins for

all of us, European banks? They have this the shown they can't raise

money privately so that sets the precedent for other bailouts, not

just for banks in Italy, at this non-performing loan issue is not

just Italy. They make up about 40% of the non-performing loans in

Europe but 60% elsewhere. So there will be bailouts elsewhere. In those

occasions we can't be sure that these junior bondholders are going

to be saved, and that will be obviously a problem politically in

Europe. Thank you very much and Merry Christmas, by the way. Merry

Christmas. Have a good one. To the US now, and as we were

reporting this time yesterday, President-elect Donald Trump has

chosen Peter Navarro, an economist fiercely

critical of China, to head The appointment comes on top

of his combative remarks during the election campaign

about the impact of Chinese imports So are we facing the real prospect

of a trade war between the world's Our economics editor

Kamal Ahmed reports. It was a major theme of the

presidential campaign, an America that had lost its way. Globalisation

and the rise of China being blamed for economic stagnation and millions

of jobs lost. Today, President elect Trump showed his hand, appointing

the Economist Peter Navarro as his new trade adviser. Peter Navarro is

clear where he feels the fault lies. Every job that American corporations

offshore to China or some other country becomes less of reason to up

here and fight for fair trade practices. President-elect Trump is

following through on his campaign pledges. We can't continue to allow

China to rape our country, and that's what they're doing. America

and China are the world's two largest economies. If a trade war

broke out it could affect global growth. The trade between them is

huge, it is valued at $660 billion. US exports to China are valued at

$162 billion. The country is America's third largest export

market but imports from China into America are far higher, standing at

498 billion dollars. And this, according to President elect Trump,

is the problem. A trade deficit with China totalling $336 billion. Mr

Trump says closing that gap would create a lot of jobs in America. At,

although people may blame outside forces, economists argue that the

jobs market has changed and that cheap goods from China have been

good for hard-pressed US consumers. China, it may be just a, Eno, we

challenge them on some policies and they may announce retaliations, they

may not, but it looks like quite a bit of friction with China in the

months ahead. China's response, as ever, cautious. At caution with an

edge. China does not appreciate being called an economic bully.

TRANSLATION: China and the United States as two large countries have

shared interests. Cooperation is the only choice. With Trump's promises

ringing in voters' is, fears of a trade war between two global

economic giants can only increase. In other news: Deutsche Bank says it

has reached a settlement with the US Department of Justice

over its sale of mortgage-backed Under the terms of the agreement,

it will pay a civil penalty of $3.1 billion and provide $4.1 billion

in consumer pay-outs That is around half the $14 billion

settlement the DoJ originally The US Department of Justice

is widening its net It is now also suing

Barclays for alleged It claims that Barclays misled

investors about the quality of loans backing securities it sold in

the run-up to the financial crisis. Barclays rejected the claims,

saying they were disconnected Planned strikes by British Airways

cabin crew on Christmas Day Employees were due to walk out

in a row over pay and conditions. According to the Unite trade union,

4,500 workers employed on so-called mixed fleet contracts,

who have joined since 2010, Talks at Britain's industrial

conciliation service, Acas, have led to a revised offer,

which will be put to a ballot The airline says it

welcomes the move. Don't forget, you can get

in touch with me and some I will be back to have a look at the

papers from around the world.