:00:00. > :00:18.The British Prime Minister faces European leaders in Brussels today,
:00:19. > :00:20.as two more credit rating agencies downgrade their outlook
:00:21. > :00:28.And South Korea announces a massive $17 billion stimulus plan
:00:29. > :00:40.The government says Brexit is one of the reasons why.
:00:41. > :00:43.Welcome to World Business Report, I'm Sally Bundock.
:00:44. > :00:45.Also in the programme: VW is expected to announce
:00:46. > :00:48.a record-breaking settlement in the US, over its rigging
:00:49. > :00:59.A European Union summit gets under way in Brussels in a few hours'
:01:00. > :01:02.time, and the UK's decision to leave the EU is top of the agenda.
:01:03. > :01:05.It comes as Britain's economic standing has suffered a fresh blow.
:01:06. > :01:07.Two credit rating agencies downgrading its prospects.
:01:08. > :01:10.Fitch says fears about the impact of the referendum on Britain's
:01:11. > :01:11.public finances had prompted its decision.
:01:12. > :01:14.Standard Poor's has also stripped Britain of its last remaining
:01:15. > :01:30.Moritz Kraemer is chief ratings officer at Standard Poor's.
:01:31. > :01:38.The institutional set up and the governance standards of the UK are
:01:39. > :01:43.no longer of the shade that we believed before in terms of
:01:44. > :01:48.predictability, stability, and effectiveness of policy-making, as
:01:49. > :01:50.it is now much harder to actually foresee how would governments react
:01:51. > :01:55.to certain financial stresses that it has been before. So we really
:01:56. > :01:59.reassessed our view of the institutional capacity of the UK
:02:00. > :02:01.government to react to financial crisis, if and when they arise.
:02:02. > :02:03.Central bankers from around the world are also meeting
:02:04. > :02:06.They will discuss how to deal with market volatility
:02:07. > :02:11.In terms of the economy of the EU, economists are now trying to weigh
:02:12. > :02:14.up how it will be affected by the UK's decision to leave.
:02:15. > :02:16.Trade is one area that is vitally important.
:02:17. > :02:19.Last year the UK exported $294 billion worth of goods and services
:02:20. > :02:25.That is according to the UK's Office for National Statistics.
:02:26. > :02:28.Over the same period it imported more than $383 billion in goods
:02:29. > :02:35.That leaves a trade deficit of $89 billion, meaning
:02:36. > :02:38.there is an imbalance, with the EU exporting a lot more
:02:39. > :02:47.Germany could be one of the biggest losers if trade between the UK
:02:48. > :02:52.Britain is the country's third-biggest export market,
:02:53. > :02:59.Holger Schmieding is chief economist at Berenberg Bank,
:03:00. > :03:15.Nice to see you. So first of all, give us your take on the impact
:03:16. > :03:22.Brexit will have. We have mentioned Germany as a key market, sorry, the
:03:23. > :03:27.UK as a key market for Germany. Just talk us through some of the impact
:03:28. > :03:30.it will have. Yes, of course. Any disruption of trade with Britain
:03:31. > :03:35.will have an impact on the German economy. But Germany is exporting
:03:36. > :03:40.mostly good and it is highly unlikely that trade in goods such as
:03:41. > :03:44.trade in cars and machines will be significantly disrupted. So the
:03:45. > :03:48.impact on Germany will likely be low from that angle. What matters more
:03:49. > :03:54.at the moment is the uncertainty about the future of Britain, and
:03:55. > :03:57.uncertainty is simply bad for business, especially bad for
:03:58. > :04:05.businesses that sell investment goods, which Germany is a great
:04:06. > :04:08.exporter of that. So the uncertainty which the Brexit decision has
:04:09. > :04:14.created is a bigger impact than the immediate risk of trade. A lot of
:04:15. > :04:17.people are drawing conclusions about the impact on the UK economy, we
:04:18. > :04:21.have heard about credit agencies as well. What are people saying about
:04:22. > :04:28.the European economy, and the impact on, say, that side of the water, as
:04:29. > :04:33.it were. First of all, Britain exports are much bigger share of its
:04:34. > :04:38.GDP, 30%, to the EU, than vice-versa. That is, the mutual
:04:39. > :04:42.dependence between the very large area of the EU and the comparatively
:04:43. > :04:48.small area of written is that the impact of any disruption on the big
:04:49. > :04:52.area as much, much smaller -- Britain. So if the UK now goes into
:04:53. > :04:56.stagnation or recession, which is quite possible, what we would see on
:04:57. > :05:03.the continent including Germany is a comparatively modest dent to growth,
:05:04. > :05:09.and Germany may lose this year 0.2% of its GDP due to the uncertainty
:05:10. > :05:13.created by Brexit. Regrettable, but it is not really a big problem.
:05:14. > :05:18.Thank you very much indeed. Let's have a look at that meeting of
:05:19. > :05:20.central bankers and economists which will be taking place later.
:05:21. > :05:22.Among those attending is the former president
:05:23. > :05:23.of the European Central Bank Jean-Claude Trichet.
:05:24. > :05:26.He told our correspondent Theo Leggett what he made
:05:27. > :05:39.Well, first of all, of course I am very sad because I was hoping that
:05:40. > :05:44.you would remain with triumph, or at least win. And I think it is a
:05:45. > :05:50.sentiment of all Europeans, without any exception. So it makes the
:05:51. > :05:56.decision of the British people even more appalling, with the dice is
:05:57. > :06:00.rolling on the integrity of the countries, not only the long-term
:06:01. > :06:08.strategy of the future, it seems to be very hard to be bleak -- very
:06:09. > :06:14.hard to believe. How much does it matter for the rest of Europe? What
:06:15. > :06:17.are the risks? First of all it is an immense problem for the UK. It is a
:06:18. > :06:22.problem for us to the extent that the UK was a member of the European
:06:23. > :06:26.Union, and of course the GDP of the UK falls down, if we have a
:06:27. > :06:31.recession, it is a problem for us. To imagine that the UK living could
:06:32. > :06:38.create an existential problem for the EU or for the euro area, the UK
:06:39. > :06:43.does not belong in the euro area, seems to me to be a vast over
:06:44. > :06:48.exaggeration. What is the worst that could happen? I think that the main
:06:49. > :06:55.problem would be for the European populist, quote unquote, namely
:06:56. > :07:02.extreme left anti- European and extreme right anti- European, to
:07:03. > :07:06.call for themselves either dismantling the present institution
:07:07. > :07:10.of the European Union... I don't expect many of them to ask for
:07:11. > :07:15.leaving the European Union, but at least they would call for another
:07:16. > :07:21.one which would perhaps be more vocal. And I would say that in the
:07:22. > :07:25.euro area I see absolutely no country in the euro area asking to
:07:26. > :07:34.change something and to leave the euro area. They did not do that
:07:35. > :07:44.after Lehman Brothers and after the Greek and Portuguese problem, and we
:07:45. > :07:48.were 15 at the time of the collapse, and they stayed and four new
:07:49. > :07:49.countries entered that area after Lehman Brothers.
:07:50. > :07:52.South Korea is the first country to announce an economic
:07:53. > :07:55.South Korea will propose a supplementary Budget of around
:07:56. > :07:57.$8.49 billion to Parliament, as it shields itself
:07:58. > :08:00.from the potential fallout from Brexit and weak growth.
:08:01. > :08:18.Nice to see you, it has been a while. Interesting because the
:08:19. > :08:23.markets were boosted via this news, won't they, where you are? It is
:08:24. > :08:27.about calming down the markets, they are too volatile and too excited, so
:08:28. > :08:30.this is a huge amount indeed that the government hopes will cushion
:08:31. > :08:34.the impact from Brexit and the weak economic growth that you mention.
:08:35. > :08:37.And all the money from the supplementary Budget will be coming
:08:38. > :08:42.from surplus funds carried over from last year and the excess tax revenue
:08:43. > :08:45.expected from the first half of the year. And the forecast is that the
:08:46. > :08:51.stimulus package will boost GDP growth to about 0.2 to 0.3% in 2016.
:08:52. > :08:56.Other policies include nationwide discount sales, diesel owners
:08:57. > :09:03.getting incentives and consumers being -- consumers purchasing new
:09:04. > :09:10.appliances, getting incentives. It is not just to calm financial
:09:11. > :09:15.markets. The Chinese Premier Li Keqiang has warned he will not allow
:09:16. > :09:20.rollercoaster ride in his markets. Li Keqiang, who is at the economic
:09:21. > :09:26.Forum in Tianjin, says the government will sustain risks when
:09:27. > :09:29.balancing its markets. The likes of India have come out with statements
:09:30. > :09:34.saying they will do whatever they can to calm down these markets thank
:09:35. > :09:39.you so much, very interesting. We will look at the numbers in just a
:09:40. > :09:45.moment. Let me just tell you about VW, which agreed to pay $15 million
:09:46. > :09:48.in settlement claim stemming from its diesel emissions scandal. It
:09:49. > :09:51.will be the largest consumer class-action settlement ever in the
:09:52. > :09:56.United States, but it still requires a judge's approval before it can go
:09:57. > :10:01.into effect. The proposal involves the Federal Government and lawyers
:10:02. > :10:06.representing the owners of around 475,000 VW vehicles, and they will
:10:07. > :10:09.be compensated, the vehicle owners, as well. Let's show you financial
:10:10. > :10:14.markets. Another story that has happened in Japan today:
:10:15. > :10:16.Takata chief executive Shigehisa Takada has said
:10:17. > :10:20.he would resign once a new regime is found for the car parts supplier,
:10:21. > :10:23.finally bowing to calls to step down over a long-running recall crisis.
:10:24. > :10:26.Takata is seeking a financial backer to help it bear to costs
:10:27. > :10:28.of a massive global recall of potentially deadly airbags.
:10:29. > :10:32.you can see Japan up quite strongly. A mixed day for markets in Asia but
:10:33. > :10:35.Japan and other markets given a boost by that news from South Korea.
:10:36. > :10:43.That is how things ended on Wall Street. Look at the NASDAQ, the tech
:10:44. > :10:44.heavy weighted index down, and the Euro trading day. -- trading