04/08/2014 World Business Report

Here is World Business Report. A familiar tale, a multibillion

dollar bailout of the European bank. Banco Espirito Santo is to be

rescued by Portugal's central bank and broken up to prevent a costly

collapse. Playing catch`up ` President Obama

is host to 50 leaders from the African continent in a bid to boost

trade and take back the title of largest trading partner from China.

Welcome to World Business Report. I'm Sally Bundock. Also in the

programme ` I ask a leading economist what the European Central

Bank can do to protect the Eurozone from the most feared word in the

economic dictionary ` deflation. But first. The Bank of Portugal has

announced details of a 4.9 billion euro rescue of Banco Espirito Santo,

one of the country's largest banks. Funding for the operation is to come

from an until now unused portion of the eurozone bailout money that

Portugal sought three years ago. Alison Roberts reports from Lisbon.

The announcement by Portugal's top ranking supervisor was aimed at

reassuring the public that steps had been taken to safeguard the

stability of the country's financial system. TRANSLATION: The back of

Portugal decided today to apply eight resolution measure to Banco

Espirito Santo. Most of the activity and assets will be transferred to a

new bank, properly capitalised and purged of problematic assets.

Details of the plan were flagged in advance. But it was a dramatic

moment. The Governor made it clear that this was a new kind of bank

rescue in which shareholders shouldered the losses while steps

are taken to protect other institutions from any contagion.

Portugal's Prime Minister had already sought to reassure the

public and bank depositors that the album was being adequately dealt

with. TRANSLATION: Financial stability is important for our

economy. We will certainly take all of the necessary measures to ensure

stability. The chief executive of the new bank that is to take over

Banco Espirito Santo's commercial banking activities set up to the

plan was unveiled at the bank's customers can be confident that it

is stronger and safer than before. There is still anger in Portugal

about past bank bailouts which saw the state pumping billions of euros

in capital was no sign of any return. That feeds into

dissatisfaction with the austerity policies of the government under the

country's bailout. With barely a year to go until the general

election, the question is whether by lending money to the new good bank

rather than taking a stake in its the government can convince the

public it has listened to their concerns.

This week will see the greatest ever concentration of African leadership

in Washington. President Obama has invited 50 African heads of state

and government to a three`day meeting which starts today. And the

focus is on trade and investment, as the President tries to make up for

lost time ` and possibly a lost opportunity. Over the past decade

it's China that has made much of the running on investment in the region,

while the US has found itself caught up in dealing with the spread of

terrorism. Now the US is hoping $900 million worth of deals between

American companies and African nations will be formally announced

this week but as ever the politics will play a big part in the

negotiations. With me is Jag Singh who is a political strategist. Good

morning. America is on the back foot. It is. This whole summit is a

chance for the US to recalibrate its image. With the African continent.

Africa holds a lot of policy implications for the US, from

security to trade, to everything in between. This summit, while it is

useful to look at in the context of Africa's relationship with China, it

is worth noting that the US does have historical ties to the African

continent and President Obama is the first African`American president. He

will possibly already be thinking about his legacy about what the

first African`American president has done for Africa. It is an

interesting time. He is going to be there. That he is also not going to

be there as well. John Kerry is going to do most of the legwork.

What is the prize for America in this? It boils down to helping the

US private sector re`engage with Africa in a meaningful way. 15 years

ago there was the African growth and opportunity act, which was brought

in place in the dying days of the Quentin Administration. `` Bill

Clinton. To start a small free`trade area for African countries to trade

with the US. It's all limited success. It only worked in the

textile industry. It is also dominated by oil and gas. It is an

opportunity for the US to go guns blazing and say, we are going to try

a fresh approach. Very quickly, Ebola. That is affecting this. Of

course it has. About three leaders have had to drop out because of a

crisis in the country. While we are comparing and contrasting with the

Chinese approach, it is worth noting that the US is sending technical

expertise and medical expertise. Thank you for coming in. It is an

event that we are keeping a close eye on. There are announcements that

we will keep you up`to`date on. Other stories are making headlines.

The world's casino capital is on a bit of losing streak. The Chinese

territory of Macau has just recorded its second consecutive monthly fall

in takings. Gambling revenue declined 3.6% in July ` but it was

still over $3.5 billion. That's on top of a similar slump in June,

which was the first drop in five years. And analysts are warning of

continued weakness as China's anti`corruption drive keeps the high

rollers away. EU sanctions targeting Russia over

its role in Ukraine's conflict have hit Aeroflot's low`cost domestic

airline Dobrolet, forcing it to cancel all its flights. It said the

sanctions imposed last Thursday resulted in the cancellation of

contracts under which it leased Boeing 737`800 planes.

The struggling Eurozone's policies have not delivered economic rewards

and there is a real risk of deflation ` that was the warning

coming from the Prime Minister of France at the end of last week. His

comments came ahead of a key meeting of the European Central Bank this

Thursday, and as key indicators for the French economy suggest that it

is lagging behind the recovery of other leading economies in the

European Union. Valls said the ECB was powerless in the face of low

inflation and added that the coming months would be difficult for

Europe. What can the ECB do? Joining me from our main newsroom is

Christian Schulz, Senior Economist at Berenberg Bank. Good morning.

What can the ECB do? Everyone has been warning them about this. There

are plenty of things they can do. Ultimately what you want to have his

the currency losing a bit of value so you can produce more of it, print

money. There are many ways of doing this. Lending cheap money to banks

in the hope that they will lend on to the real economy. Another would

be to buy bonds directly. The famous quantitative easing, something that

ECB has not done. Not necessarily doing that yet, but certainly

discussing it. Will we see that this week? I do not think so. The ECB has

just announced a range of controversial and potentially

powerful measures, such as negative interest rates and long`term loans

to banks. They probably want to see how the measures feed and to the

real economy. Before the end of the year, I do not think the ECB will

employ quantitative easing. Thank you.

A quick perspective on an event that is going to be on the minds of

investors. I am not bank assured the numbers briefly. But the markets in

Asia are in and out a positive territory. Concern about Portugal is

hitting sentiment to a degree. CU soon as we go to the papers.

A major study suggests the workload of GP's surgeries is increased

rather than reduced by getting patients to call in for advice

instead of having a face`to`face appointment. The British Medical

Association says the research shows phone assessments can't always

satisfactorily replace in`person consultations. Here's our health

correspondent, Jane