:00:18. > :00:21.Welcome to World Business Report. On a cliff edge - budget talks in
:00:21. > :00:31.Washington fail to find a deal to stop damaging tax increases and
:00:31. > :00:39.
:00:39. > :00:42.spending cuts in the US. We take a look at one of the
:00:42. > :00:50.biggest challenges facing European leaders in 2013, to deliver on its
:00:50. > :00:52.banking union proposals. The clock is ticking. When
:00:52. > :00:54.politicians gather again in Washington for critical talks about
:00:54. > :00:57.economic policy they only have until midnight to reach agreement
:00:57. > :01:04.and prevent the US economy from tipping over the so-called fiscal
:01:04. > :01:07.cliff. Republicans and Democrats are grappling over how best to
:01:07. > :01:12.manage changes to tax and spending laws that come into effect on New
:01:12. > :01:15.Year's Day. If a deal is not reached, nearly all households in
:01:15. > :01:25.the US will be hit by a significant fall in the fall in the
:01:25. > :01:26.
:01:26. > :01:36.economists warn this will lead to a recession.
:01:36. > :01:40.We Gillard 20 York studios. Bring There are less than 24 hours until
:01:40. > :01:46.the deadline. He does appear that lawmakers have so far failed to
:01:46. > :01:53.reach a deal. Time is running against them. We have less than 24
:01:53. > :02:00.hours to come up with something. As Harry Reid said, there remain
:02:00. > :02:06.serious differences between that two. On the Republican side, they
:02:06. > :02:10.have reached out to the vice- president Joe Biden. He is a friend
:02:10. > :02:15.of the Republican senator. They hope that the two in get together
:02:15. > :02:20.to come up with something. Reports say that the two will come -- will
:02:20. > :02:27.preven prevent us from going off the
:02:27. > :02:30.fiscal cliff. The size remain pretty grim. There is little hope.
:02:30. > :02:35.The clock is running against them. A political will seems to be
:02:35. > :02:40.lacking. What you think will be the likely outcome? There are
:02:40. > :02:44.suggestions suggestionsmade not a see a deal happen by January 1st but
:02:44. > :02:47.they may not necessarily be the doom and gloom that people are
:02:47. > :02:54.speaking about in part because if they can come up with some sort of
:02:54. > :02:59.agreement in the next few days or retroactive for. In other words,
:02:59. > :03:04.they could undo the damage that is meant to ke meant to kery.
:03:04. > :03:09.something that the market will be watching very carefully over the
:03:09. > :03:15.next few days. The reason for optimism is because it becomes a
:03:15. > :03:19.little bit little bit ter January 1st. If we go off the fiscal cliff, you
:03:19. > :03:25.have these tax increases and spending cuts. Any deal that is
:03:25. > :03:29.done after this, you could argue, is a spending cut. Given that
:03:29. > :03:35.Republicans are opposed to tax increases, voting in favour of a
:03:35. > :03:40.tax cut for the middle class may be more palatable. In the long-term,
:03:41. > :03:46.is it thought that during this term for Barack Obama, his second term,
:03:46. > :03:50.they make grass but the metal fully. Overcoming the problem of all in
:03:50. > :03:53.debt and some of the spending commitments that they have. Those
:03:53. > :04:00.difficult political questions. Do you think that they may be tackled
:04:00. > :04:05.during this term? If you cannot tackle it under the circumstances,
:04:05. > :04:10.it is hard to see how they could be tackled. There is a recognition
:04:10. > :04:18.be dealt with. If you look at the spending commitments of the US
:04:18. > :04:22.government government ular in areas the social programmes, they are the
:04:22. > :04:27.costs -- bear the cost of the next few decades outpaces the revenues
:04:27. > :04:31.of their taking in. Something needs to be done. He must look at the
:04:31. > :04:35.difficulty that they have at the moment. The reason that America
:04:35. > :04:39.finds itself in the situation is because they created this fiscal
:04:39. > :04:44.cliff. This was in part because they are unable to read a previous
:04:44. > :04:51.deal on deficits and how to address the issue. Here we are again. It is
:04:51. > :04:56.hard to see how much progress can but certainly the two sides remain
:04:56. > :05:02.so far apart that it will be difficult t difficult t I will talk to
:05:02. > :05:07.about this in the future. The winner out a key to the world's
:05:07. > :05:11.second largest economy. In China, many factory unexpectedly expanded
:05:11. > :05:17.at the fastest pace in 19 months in December, boosting optimism that
:05:17. > :05:23.the world's second largest economy is gaining traction. Fill us in on
:05:23. > :05:31.what is going on in China. To this is definitely good news is
:05:31. > :05:37.to end the year 2012 will. Today's figures were released by HSBC. The
:05:37. > :05:43.number above 50 is showing above that growth is accelerated in
:05:43. > :05:48.December. Many factory shows that manufacturing is higher then
:05:48. > :05:51.compared to November. To November was the first time in more than two
:05:51. > :05:56.years that this number went above 50 as showing signs that the
:05:56. > :06:01.manufacturing sector in China is recovering. This is not just the
:06:01. > :06:05.manufacturing sector but the been more signs that it has been
:06:05. > :06:09.recovering because it has been growing at a slower pace of around
:06:09. > :06:12.seven or 8%. That seems farce when compared to other countries but
:06:12. > :06:17.from China's pointed you which have been growing at double digits for
:06:17. > :06:26.many years, this has been a Asians for
:06:26. > :06:31.been the key engine for Asia's growth. We are -- we are expecting
:06:31. > :06:37.figures from the government on the manufacturing sector tomorrow. 1st
:06:37. > :06:43.January, 2013. It should so -- shows signs of recovery. A good
:06:43. > :06:46.sign of good news. One of the biggest tasks facing the
:06:46. > :06:49.European Union in the coming year is to deliver on its far-reaching
:06:49. > :06:52.banking union proposal. This is the ambitious plan to make the European
:06:52. > :06:55.Central Bank chief regulator of the largest 200 or so lenders. It may
:06:55. > :06:57.sound like a somewhat dull, technical move but it represents
:06:57. > :07:07.the most significant centralisation of national financial powers since
:07:07. > :07:11.
:07:11. > :07:15.the start of the crisis. Spring 2014, the ECB may have the
:07:15. > :07:17.power to close banks that do not toe the line. It is a master plan
:07:18. > :07:21.to take the reins away from national supervisors and breaking
:07:21. > :07:26.governments governments and the banks that lent
:07:26. > :07:31.it to them but also depend on them. Ministers from 27 countries have
:07:31. > :07:36.had some success in reconciling concerns. Initially the ECB will
:07:36. > :07:40.have no remit over German Savings Banks. None Euro-currency members
:07:40. > :07:44.can now block rules that they do not like. The earning power of the
:07:44. > :07:48.City of London is less likely to be damaged. The credit markets know
:07:48. > :07:55.that putting the ECB in charge will not make a difference until their
:07:55. > :07:59.art collective back-up funds to call upon. You need to establish a
:07:59. > :08:02.deposit scheme that ensures that if one of the banks that go bump --
:08:02. > :08:09.bust which was one of the problems that we are tried resolved but
:08:09. > :08:13.instead the funds come out of a that it is all the more reason for
:08:13. > :08:19.this adviser to begin. peripheral peripheral suffering
:08:19. > :08:22.because it float. This is because the investors know that and euro in
:08:22. > :08:26.Spain is what West of the euro in Germany. Th Germany. Thheir deposits
:08:26. > :08:33.out. As this happens, based in Spain and Italy have to raise the
:08:33. > :08:37.there. They have to remain -- raise rates to remain profitable. This
:08:37. > :08:41.may be a star for cash and fault. The liabili The liabili
:08:41. > :08:47.sovereign. The Governor of the Bank of England once remarked that banks
:08:47. > :08:52.are global in life but National in death. Even with all the legal
:08:52. > :08:58.framework in place, achieving a working banking union is going to
:08:58. > :09:04.require enormous concessions from all concerned. Without them,
:09:04. > :09:14.European Monetary Union could be stuck in its present, unstable
:09:14. > :09:15.
:09:15. > :09:18.stage. It is quite the task ahead.
:09:18. > :09:20.Newsweek has published its last edition on paper. From tomorrow,
:09:20. > :09:23.the magazine will be entirely digital - available on the internet
:09:23. > :09:26.and tablet computers. It is an attempt to reverse a slump in
:09:26. > :09:28.subscribers and cut costs. But it remains to be seen - can
:09:28. > :09:38.traditional print media, even established players like Newsweek,
:09:38. > :09:39.
:09:39. > :09:42.really adapt to the pace and scale of the online world?
:09:42. > :09:46.Japan is close from holiday. Elsewhere, it is a flat mixed