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U.S. Supreme Court Lets Transgender Military Ban Take Effect; Roma, The Favorite Lead with 10 Oscar Nominations Each; Zimbabwe Finance Minister Says Recent Protests About Increase in Fuel Prices Were Planned; Trump's Lawyer Tries Cleaning Up Moscow Tower Comments; VTB Chairman: We Weren't Involved with Moscow Trump Tower; European Stocks Hit By Growth Concerns; ZEW Assessment of German Economy Shows a Four-Year Decline; Brexit Uncertainty Clouds Economic Outlook in Europe; Dow Drops as Slowdown Fears Increase; Stocks Sink on Global Slowdown and Trade Fears; UBS Shares Fall After Earnings Miss; Investors See The Economy's Boom Coming To An End, Huawei Says The Tech Industry Has Been Hurt More Than Any Other By The U.S.-China Trade War. Aired: 3-4p ET

Aired January 22, 2019 - 15:00   ET


RICHARD QUEST, HOST, QUEST MEANS BUSINESS: As we enter the last hour of trade on Wall Street, all the major indices are sharply lower, and these

are the reasons why. There are worries that the China-U.S. trade talks could be in jeopardy. The market didn't like it. The Dow went down 400

points. You've got the problems over the question of slow down. What does slow down mean? We'll discuss that throughout the course of the program,

the head of the OECD is with us. And central bankers have problems - Axel Weber will be here to discuss that from UBS. Live from the World Economic

Forum in Davos, this is "Quest Means Business." I'm Richard Quest with Sidney Snowbot, who is flashing first tonight? Together, sir, we mean


Good evening, busy hour ahead, we'll certainly get to what's been said in Davos in just a moment. First, there is a grim reminder of what we discuss

here has impacts far away from the ski slopes. More to the point, what may not be discussed here, off the lows of the day, but down 409 points for the

Dow, off 1.5%. It's the biggest loss in some three weeks. Worse the NASDAQ down 2% as investors are reacting to four key factors.

Well, the factors are the IMF's warnings about global growth. You've got warnings of China's economic slowdown. We have a dismal housing report in

the U.S., and reports the U.S. has cancelled a trade meeting with China.

Investors see the economy's boom coming to an end. There is no escaping it here at Davos. All the talk is of a chance of a slowdown.


RAY DALIO, FOUNDER, BRIDGEWATER ASSOCIATES: U.S., Europe, China - all of those will be experiencing a greater level of slowing.

CHRISTINE LAGARDE, MANAGING DIRECTOR, INTERNATIONAL MONETARY FUND: The risk of a sharper decline in global growth has certainly increased.

JOE KAESER, CEO, SIEMENS: You've got the United States, you've got China, you got Brexit, obviously, a home-made issue and in Europe, the rest of

Europe is in the middle of it. So there's no wonder that there is no slow down.

LAGARDE: Be ready if a serious slowdown were to materialize.


QUEST: Slowdown, slowdown, slowdown. Everywhere you go here, people are talking of it. Of course the issue is when does a slowdown become the "R"

word? Or how close do we get - I spoke to the head of the OECD who is predicting a slowdown in growth before the IMF. Angel Gurria was in no

doubt as to why things look gloomy.


JOSE ANGEL GURRIA TREVINO, SECRETARY GENERAL, OECD: One reason - trade tensions. This is what changed, and the reason is, if you invest, you do

it to produce because you want to sell. If you do not know if you are going to sell or at what tariff you are going to sell, you will have a 25%

tariff. That's good. Then you don't invest and that is affecting the world.

QUEST: These trade tariffs from the U.S. and China are relatively limited at the moment. And the steel and aluminum with all the rest, relatively


GURRIA TREVINO: The expectation that they could be increased, the expectation that there could be tension in terms of cars, for example or

whatever. This is what is holding back an investor. Why? Because again if you are going to invest, you need to know that you are going to be able

to sell.

QUEST: But you don't see recession, for example.

GURRIA TREVINO: No, I don't see recession. It's a slowdown. And frankly, you know, I was a little surprised to see that everybody was renting their

clothes because China only grew at 6.6%. Well, they said they were going to grow around 6.5%. This is exactly what they are doing. And we are

projecting that next year, they are going to grow at 6.3% and then, maybe 6%.

QUEST: But doesn't China require the level of 6.6 plus percent so that the industrialization of the country continues in the proper way?

GURRIA TREVINO: Well, I'm saying that if China continues to grow between 6% and 6.5% per year, they are going to be creating a huge economy every

year, additional and that for me the question of sustainability in the sense of being able to maintain it over time becomes very important.

QUEST: Choose your color.


QUEST: Red. All right, I think you defined it beautifully. What keeps you awake? What's your biggest worry at the moment?

GURRIA TREVINO: What keeps me awake at night? This is the part that keeps me awake at night. The trade. There is an "R" there missing.


GURRIA TREVINO: The trade tensions. Not just between China and the U.S., but it's also Europe is involved in here. Latin America is involved in

here. You know, so it's the trade - the trade tensions. That has the potential to continue to prevent investment and that is what's holding back



QUEST: We'll have many more contributions to the "World of Worries," as we move on. Huawei says the tech industry has been hurt more than any other

by the U.S.-China trade war. The Chinese telecom's giant has become a key issue in the trade dispute. It's Chief Financial Officer, the CFO's arrest

in Canada last month, at the request of the United States. Speaking in Davos earlier, the Deputy Chairman Ken Hu said, "Huawei was already feeling

the damaging effect of the trade dispute and the entire industry would feel them, too."


KEN HU, DEPUTY CHAIRMAN, HUAWEI: We've seen, you know, the effect on many of the companies, including Huawei, and some of the sectors from the trade

war, and as a technology industry, we're highly reliant on the global supply chain and the global innovation ecosystem. So we are probably now

suffering the most right now.


QUEST: I am joined now by Brad Smith, President of Microsoft. Good to see you, sir.


QUEST: Let's get that out of the way, first, are you feeling the effects of the slowdown as a result of the trade tensions?

SMITH: Well, perhaps less than others, both because of like many other American tech companies, you know, our business in China really isn't

nearly as large as our business in the rest of the world.

In addition, I would say, if you want to find people who are really feeling the pain of the trade war, you know, talk to farmers who grow soybeans in

Iowa. I think they would have a story that's hard to beat. Those of us in tech are in many ways more fortunate.

QUEST: Right. Except, your competitor, Apple who seems to be somewhat hit the hardest. But that's story for another occasion. And on this issue of

economically in your markets, what I'm hearing here in Davos, as people are saying, there is a slowdown, we are frightened or concerned it could get

much worse.

SMITH: Well, I think what we are really seeing right now is geopolitical instability that is you know, now finally at least raising questions about

macroeconomic performance. You know, we need the U.S. government to reopen. We want to see a trade agreement between the United States and

China. The world needs a stable outcome in the United Kingdom with Brexit. I think it's too early to declare a slow down or a bigger thing, but these

things are not helping.

QUEST: And you get hit by them in some shape or form, as all companies do.

SMITH: Everybody does.

QUEST: In some shape or form. Only question here in Davos, everybody is obsessed her about the Fourth Industrial Revolution, which of course,

you're at the forefront of along with it, and the data privacy issues that go along with this, how important is it for you to be seen to be on the

consumer side? On the little minor moment side?

SMITH: Well, I think it's more important for us to be doing something that is protecting consumer data. Now, of course, if we are doing something, we

hope that people will appreciate what we are doing and see it as well. But certainly, we have been focused on doing things. We have extended to

customers around the world, the new data privacy rights, the European Union citizens get under their regulation.

We have been advocating for additional steps for new laws in the United States. We'll need to keep taking new steps. I don't think this issue is

over. All of us in the tech sector in 2019 are going to need to build on what we did last year and add yet more protection for privacy.

QUEST: But the speed at which the change is coming is faster than regulators can keep up with it. Whether it be on data protection, hacking

certainly, I mean, Arne Sorenson of course got badly hacked at Marriott Hotel SPG - came up with - you've heard this quote a million times, there

are only two companies, those that have been hacked and know it and those that have been hacked and don't. Would you agree?

SMITH: Probably. There may be a few exceptions, but the exceptions are probably few and far between.

QUEST: So, what worries you? What concerns you at the moment?

SMITH: Well, I think it is geopolitics, and it relates to the point that you just made, in era of rapidly technology, we need the tech sector to

step up and we need governments to move faster.

QUEST: Choose your color.

SMITH: Well, I'm going to choose red because I think we should have concern. But I would put a big circle around this, because governments can

do more. We need governments to do more.

QUEST: But what will get them to do more?


SMITH: I think that there is hope. I think as with all such things, we won't see as much done this year as we would like, but it's a year where

real things can get done. I think we saw some progress last year on cyber security, we saw it in the privacy space. We can build on that.

QUEST: Is this a different type of Davos? Because the political rock stars, there aren't as many of them here? Or is it better? Come on, come

off the fence. Come off the fence.

SMITH: You know, it's better and it's worse. That is a fence, I'll stand right on it. Balance, very carefully. You know, the essence of Davos is

in many way lots of quiet conversations, coupled with major pronouncements by world leaders. We had few of the pronouncements. Maybe that gives us

more time to figure out more quietly what we could actually do to have some positive impact in the world.

QUEST: With less geopolitics. Good to see you, sir.

SMITH: Good to see you.

QUEST: As always. Thank you very much, indeed. When we return, I ask New Zealand's Prime Minister, Jacinda Ardern about whether her country is

feeling the effects of a global slowdown and this, look at the way the "World of Worries" is moving. It's fascinating issues that people are

talking about on this forum. Fascinating. In a moment.


QUEST: The issue of populism dominated the agenda here today. Around the world, leaders are turning inwards, putting up walls instead of working

together to fix the big global issues.

You just heard that exact point from Brad Smith from Microsoft. Well, today also here, first up, Brazil's President, Jair Bolsonaro, sometimes

called the Trump of the tropics. He was here among the political and business elite. Where he stepped to a pragmatic message. Brazil will

become more willing to business, to welcome business.

Then came the U.S. Secretary of State to put the populist message into clear terms. Appearing by video link, Mike Pompeo issued this warning.


MIKE POMPEO, U.S. SECRETARY OF STATE: Al around the world, voters have tuned out politicians and political alliances that they thought weren't

representing their interest. In Ohio, Rio de Janeiro and in Rome, people are asking questions that haven't been asked or at least haven been taken

seriously in an awfully long time. Is economic globalization really good for me? Are political leaders adequately protecting us from threats like

terrorism? Are they working to secure our national interest abroad?


POMPEO: The central question is this, do they signal fair weather or foreshadow a storm? Is this pattern of disruption a force for good or not?

I'd argue that this disruption is a positive development.


QUEST: And so the U.S. Secretary of State would argue it's positive, this populism. What do you think about this? Get your phones, your tablets,

whatever else you might be using and go to The question is, should world leaders prioritize the global issues first or their national

issues first? You can see an argument that says if you get the national things right, then the global follows.

You can you also see the argument that says, do the global first, because the national takes second place. You will you see the results on your

screen, global or national first? The populist movements who run a deep and stressed established political systems. It's a sentiment that is

highlighted in Edelman's latest trust barometer.

The survey found just one in five people believe the system is working for them, 75% of the respondents trust their employer to do what is right, much

more than NGOs, business in general, government or the media.

Look at that, my employer will do what is right by a considerable margin over the rest and the media, by the way, comes in last. Richard Edelman is

with me. Good to see you.


QUEST: We always enjoy the trust barometer at Davos because it gives us a window into what the C-suite is like.

EDELMAN: The moment is now for business because trust has actually moved to local. It was top down, then it went to peer-to-peer; now with all the

trust violations on social media and fake news, there is now local trust and big expectations of CEOs; 75% say act, go, don't wait for government.

QUEST: Okay, but you were surprised by this year's numbers?

EDELMAN: Well, my employer rushes to the top of the charts, and it means that trust is local.

QUEST: But what happened in the last year that caused that?

EDELMAN: I think people looked at social media and said, "I can't rely on that." They looked at the big leaders of the world and said, "I don't

really love government," and so they're turning to the thing that they feel they can control. It's a full employment economy. They feel more or less

that they have an ability to influence which way business goes. So trust becomes local, just like your local Congressman and you don't trust


QUEST: Okay, but, when you put into the sphere of say here at Davos, what message can you tell the CEOs and those who are here, those government

leaders who come here? I mean, how do you put this right?

EDELMAN; The mass class divide is now completely on the basis of fears, not of immigrants but of jobs lost and it's the jobs lost to robots. And

so I think that business has to take very seriously automation, retraining and getting in front of this issue.

QUEST: Well, we smile about Sidney Snowbot outside, but the reason we created him/her was because exactly of what you are saying. This

revolution is about to hit us.

EDELMAN: The employer/employee compact calls for having a big mission, but also for doing things for the employee. Give them fair pay. Give them

retraining and also focus in on the local community, where they live and be a part of the solution.

QUEST: How do you square that with the Wall Street culture of profit only mantra?

EDELMAN: The new CEO understands deeply.

QUEST: Do they?

EDELMAN: Absolutely. They get it. Look at PayPal this past week, putting $25 million towards Federal employees who are on furlough. Brad Smith,

last week, $500 million towards low income housing in Seattle. Kevin Johnson of Starbucks after that problem in May, closing the stores for a

day, retraining the people. These are all significant evidence of CEOs acting differently.

QUEST: If we do not at a time when government seems to be singularly unable or unwilling or incompetent, would you agree?

EDELMAN: The moment is now for business because the trust now is reliant on leaders actually taking on the issues of the day, 75% of people now say,

"I believe that business can maim money and improve society."

QUEST: Isn't it unusual that the businesses are liked, I mean, but individual CEOs are often not. Individual CEOs are often thought of as

being money grabbing, profit taking.

EDELMAN: But CEOs who act in the interest of their employees are now trusted and that's a huge change, so I'm going to write down my biggest


QUEST: What color would you like?

EDELMAN: I want a red one and I am going to write down automation.

QUEST: You write down what you like.

EDELMAN: We have to retrain the people.

QUEST: And the duty and the obligation - the primary duty and obligation to do that falls upon who?


EDELMAN: It falls on the companies that are going to make the changes, which is companies that make robots and also the companies that are going

to have to displace or replace or up skill the people. Those people have to act, meaning business, and not wait for government. As always --

QUEST: Good to see you.

EDELMAN: Thank you.

QUEST: Have a good Davos. Is it a good Davos for you?

EDELMAN: I love it.

QUEST: There's something about it. Good.

EDELMAN: Of course.

QUEST: Good to see you. Now, come back to the - if we come back to the "World of Worries," very interesting what is happening. Cast your eye

across the "World of Worries," and you see climate. Several people have gone for climate, cyber, climate, climate change. Many of the leaders and

CEOs say they've spoken to say it's their biggest concern. And that's the message that the legendary British broadcaster, David Attenborough brought

to the stage here in Davos in an interview with Britain's Prince William.

He urged leaders to find practical solutions. He said if they don't, we could unwittingly walk into a climate catastrophe.


DAVID ATTENBOROUGH, BRITISH BROADCASTER AND NATURALIST: We are now so numerous, so powerful, so all pervasive, the mechanisms that we have for

destruction are so wholesale, so frightening, that we can actually exterminate whole ecosystems without even noticing it. We have now to be

really aware of the dangers of what we are doing.


QUEST: New Zealand's Prime Minister joined Sir David on stage today and echoed his call for action to protect the environment. Jacinda Ardern said

the effects of climate change were already invisible in her country. I caught up with Jacinda Ardern earlier and I asked her, what she hopes to

achieve here at WEF.


JACINDA ARDERN, NEW ZEALAND PRIME MINISTER: We have to think about the wellbeing of our people, whether or not people are thriving in our

economies, otherwise, we see the kind of disruption that I think we are seeing now and ultimately that affects our democracy, so not wooly at all.

QUEST: Well, not woolly, but it's also difficult to provide policies, like on climate change. Like the sort of policies you are trying to introduce

in New Zealand, but they sound good, but execution is the difficult part, as you are discovering.

ARDERN: You are absolutely right, which is why probably why most economies so far have created scorecards, check lists -- what we are trying to do is

embedded into our policy making. So that's what we are doing differently. This year, we will produce a wellbeing budget. That will be our first


QUEST: You had meetings with Theresa May when you were in London?

ARDERN: I did.

QUEST: You stand ready to do a free trade deal with the U.K.?

ARDERN: Look, if and when the U.K. resolves the exit from Brexit, we are amongst three nations that at the moment the U.K. has laid the preparatory

ground work for free trade agreement alongside Australia and the United States.

QUEST: Does a no-deal Brexit, you're quoted as saying that you will be affected?

ARDERN: Look, I think you'd have a tough time to find those who wouldn't be affected. Mostly, not so much because of a hard Brexit, but because of

the sudden nature of a no-deal Brexit.

QUEST: Yourselves and Australia are always as resource societies at one level, China slow down hit hard. Are you feeling the effects of that?

ARDERN: Look, I think what we are all likely to feel long term effects are things like trade tensions, tit for tat, trade wars - those affect us in

more than just the direct trade effects, but actually in terms of that shift away from predictable rule's based order and that's something that as

a small trading nation we crave, which is why we are doing what we can to make sure that the WTO, our multilateral institutions really have our


QUEST: Wait a minute, you just get the feeling, I mean, you are right, a small trading nation, but trade is well above it. I mean, New Zealand is

one of those countries that punches well above its weight of size.

ARDERN: Well, it does. It does.

QUEST: And as that result - it means you do get clobbered from all sides?

ARDERN: Well, look, it's obviously a position that we're used to being in. But we're also used to being in a position of being the champion, I would

like to think of a rules based order.

We were right there at the formation of the United Nations. These institutions are important to us around value specific terms. And that's

why you'll see us out there promoting, making sure that we don't throw the baby out with the bath water. We need some change. But actually, we've

gained a lot from those institutions. We need a whip to support them.

QUEST: All right, choose a color, Prime Minister.

ARDERN: Obviously.

QUEST: Going for the red. You can either join on somebody else's with as tick and a circle or start something new.

ARDERN: Can I do circles and new?

QUEST: You can do whatever you like, this is the new architecture.


ARDERN: Obviously, inequality and climate. But for me the issue is if we have indifference.


QUEST: Indifference from the New Zealand Prime Minister. Well, I mean, not cheesy indifference, but you know what I mean.

According to the - well, I hope you do know. According to those of you voting at, almost three quarters of you say, world leaders

should be prioritizing global issues rather than national issues.

I am guessing you all feel that unless and until it's your national issue that gets pushed to one side for a global matter instead.

Zimbabwe's President didn't arrive in Davos after all the violent protests over fuel price hikes. I spoke to his Finance Minister, he says the

protests were pre-planned.


QUEST: Hello, I'm Richard Quest. There is more "Quest Means Business," in just a moment. Zimbabwe's Finance Minister tells me that recent deadly

protests had nothing to do with rising fuel prices, and anyway, it was premeditated. We've got Moscow Trump Tower project still in the spotlight.

I'll speak to one of Russia's top bankers who are still under U.S. sanctions.

As you can I continue this evening, this is CNN and of course on this network, from Davos, the facts always come first.

Hopes are fading in the search for a plane carrying Argentinian footballer Emiliano Sala who went missing over the English Channel on Monday night and

police say if the plane crashed into the water, the chances of survival are slim. Sala had just recently signed with the Premier League Club Cardiff

City and was heading there when his plane disappeared.

The U.S. Supreme Court handed a victory to President Trump on Tuesday by allowing Mr. Trump's ban on transgender people serving in the military to

go into effect even as the case continues through the lower courts. Activists for transgender rights say the ban is cruel and irrational.


The Oscar nominations have been announced and the black and white film "Roma" made history, earning the first best picture nomination ever for


"Roma" earned 10 nominations, tying it with "The Favorite" for the most Oscar nod. "Black Panther" was another, getting seven nominations

including one for best picture. The Zimbabwean Finance Minister denied that protest in his country was sparked by a sudden hike in fuel prices.

President Emmerson Mnangagwa decided to skip Davos after violence in Harare turned deadly. At least five people were shot by the police. The

government also switched off the internet. Mthuli Ncube told me these protests were planned.


MTHULI NCUBE, FINANCE MINISTER, ZIMBABWE: What really triggered the rebellion or whatever on the streets was not the fuel price. This was pre-

planned. Those are the facts. There was, already, you know, a swell, and this was just one of the issues that was earlier on.

But coming to fuel specifically, what had happened was that fuel already was trading at quite a high price in other quarters. There was a parallel

market that they re-emerged, and that's where fuel was available as well. So the price that was announced was not too far away from what was already

being -- you know, out there frankly.

QUEST: If we get to the core of it, the world watched as the president took power a year or two ago, and then the elections. And the world had

great hope that the Mugabe era of corruption, misery, riots, was over. It would seem not. The way the government -- from what we hear from

correspondents there, the way the government has handled these disturbance is like the old days.

NCUBE: The old days were about keeping the status quo. What's happening now is about moving forward in economic reforms.

QUEST: Locking up -- locking up union leaders, using heavy-handed tactics on the streets, switching off the internet. I do recall President Macron

switching off the internet in Paris.

NCUBE: President Macron has been very clear this morning, issued a very clear statement to say, look, there is no room for violence in Zimbabwe on

either side, and it's quite clear that the issue about the internet was just a temporary and tactical strategy to try to manage the situation, it

is not permanent. Lo and behold, the internet is back and we're moving forward.

It's never easy to when it's in force --

QUEST: Only because -- well, only because -- only because the court rules that the minister didn't have the authority, only the president had the

authority. If it had been up, if it'd be left to your government, the internet would still be off?

NCUBE: No, it would be on, it would be back on. Because once the situation --

QUEST: Right --

NCUBE: Has calmed down, there's no need to use that as a mechanism for managing insurrection and managing information and dissemination among the

protesters. Government has a duty to protect the victims of violence, and it has used several means to do that, and the internet shutdown was just

part of it. It's temporary.

QUEST: Let's just talk about basically the philosophy. You said the country was opened for business.


QUEST: And you wanted to attract business. How on earth do you hope to attract business when the perception of Zimbabwe is it's back to the bad-

old days. Single leader, dictatorial orders, brutality on the streets, and you couldn't even get the loan that you wanted from South Africa.

NCUBE: Yes, thanks for that, Richard. You know, what? The -- what you see in the streets or what you saw in the streets is actually a sign that the

government is opened, democratic space has been opened.

This couldn't happen in the past. This is happening now. It's a sign that President Mnangagwa is serious about opening up the democratic space --

QUEST: People don't believe you. People don't believe you.

NCUBE: Well, they should try doing it in the past, they wouldn't have been able to do it, so they better believe me. And this is about progress, it's

about the future, it's about reforms --

QUEST: Right --

NCUBE: Reforms and there are easy -- we're facing forward. It's not about maintaining a status quo, it's about moving away from the status quo and

that road is not going to be easy, and we ask for everyone to work together. The president has called for dialogue among everyone so that we

can face this challenge together.

It is not normal for a country not to have its own currency. It is not normal for this type of decay to be allowed. We need to change course and

that's what we're trying to do, it's not easy.

QUEST: All right, you know, you didn't choose a pen. What color?


QUEST: Oh, why not, sir. So what's the issue? The number one issue for you in the world at the moment, you can write it, if it's trade, you go

there, climate you go there, if it's something else, just start a new one. Technology is over there.

[15:35:00] NCUBE: I would say commodity prices.

QUEST: Fine.

NCUBE: Yes --

QUEST: Just go like this, commodities --

NCUBE: Yes --

QUEST: That's the number one issue for you?

NCUBE: Yes, we're a commodity producer -- commodity, then I would say, that goes with global growth.

QUEST: Global growth, big one there --

NCUBE: Yes --

QUEST: Go write it in the middle for that --

NCUBE: Global growth --

QUEST: Global growth. Thank you very much, sir. Hey, right, when we come back after the break, we'll turn our attentions to matters Moscow. Andrey

Kostin of VTB Bank is with us, we'll be talking all sorts of things. And yes, I'll ask him about that tower in Moscow.


QUEST: Donald Trump's lawyer Rudy Guiliani is doing some damage control. He's walking his own comments back after saying -- Trump build it -- after

saying talks to build a Trump Tower in Moscow continued up to the 2016 election.

Mr. Trump's discussion about the project with his former Attorney Michael Cohen had been subject to a changing narrative, regardless of when they

ended. Then they happened, while Donald Trump cozied up to Russia on the campaign trail.

Back in March, Democrats in U.S. House of Representatives published messages Michael Cohen received from a contact named Felix Sater. They say

the CEO of VTB Bank indicated he would finance Mr. Trump's Moscow project. Andrey Kostin is the chairman of VTB Bank with me now.


QUEST: So, good to see you. Before we talk --

KOSTIN: Good to see you --

QUEST: About Davos and economics things, let's discuss -- you heard what I said about Mr. Sater, you obviously read -- Mr. Sater says in e-mails, you

were going to fund Donald Trump's tower in Moscow.

KOSTIN: If he really said so, he's a liar and a crook. That's the only thing I can --

QUEST: It will --

KOSTIN: It'll be -- I never, ever, heard about this project. Never ever - -

QUEST: You never had talks?


QUEST: No e-mails?


QUEST: Nothing?

KOSTIN: No, nothing.

QUEST: Yes --

KOSTIN: The person was just lying, you know --

QUEST: All right --

KOSTIN: Sometimes people do.

QUEST: Well, we'll come to that in a second results --

KOSTIN: I don't know why? And whose advice he is relying, that's a different story, but --

QUEST: But it's not -- but you had no dealings with him honestly?

KOSTIN: Absolutely, no.

QUEST: Well, OK --

KOSTIN: You know, Mr. Sater, as far as I understand from the local -- from your press, he has a very bad reputation and record. So --

[15:40:00] QUEST: How damaging is it for you, the bank, to be tied up in the whole -- I mean, it's one thing to be --

KOSTIN: Has to be them because it's lying, and nobody ever is serious with these conversations with us. I think everybody knows that he's lying. I

mean --

QUEST: You're supposed to be Vladimir Putin's right-hand man financing him, according to Mr. Sater. Do you finance him?

KOSTIN: Mr. Sater knows nothing about Russia very much. He's a -- he's a little crook, he knows very little about Russia who was convicted in

America for some crimes as far as I understand from American --

QUEST: Right --

KOSTIN: Press. So he's nobody. I mean, he's just a person used by somebody maybe.

QUEST: Let's turn our attention to the relationship between Vladimir, a bit of Russia and the west at the moment. That does -- it is deteriorating

-- well, it couldn't get much worse. With the United States and obviously with the EU's eastern border. Are you concerned about the worsening


KOSTIN: Not anymore, frankly speaking. I think it's very much a domestic issue for America. I think that's a to a very big extent, there is a

growing division in American society between the president and the Congress. I think we'll just have to wait and see what's going to happen.

QUEST: So where are you --

KOSTIN: I think it's not possible now to conduct any, my personal opinion, you got negotiations and the American side is not eager to do it. I think

we should just wait and see what's going to happen maybe in one, two year's time. That's my personal opinion frankly.

QUEST: But Europe is not far behind. Relations between Europe, the EU and Russia are not good?

KOSTIN: Yes, I think it's not good. I think they have a better chance to be improved, that's true. I mean, of course, European leaders now more

pre-occupied with their own domestic problems like Mr. May with Brexit, Mister --

QUEST: Macron.

KOSTIN: Macron with the manifestation of -- so, I think they should resolve this, maybe they're focusing more on domestically. But I think

there's very much on the agenda, yes --

QUEST: So --

KOSTIN: Between Russia and EU is quite important.

QUEST: So where is the bank? What is your bank now looking to do new business from?

KOSTIN: You know, our bank was always focusing on Russia. I'll say 90 percent of our business is in Russia, so we are doing quite well this year

with a record profit, you know, and with a good result. So we will continue to do it. I mean, we will focus on Russia and we think there's a

lot of potential in the Russian economy in general.

I think we can grow much faster. I think we could do much better, I mean, the country --

QUEST: But the Russian economy -- now, I mean, it -- would you say the Russian economy is still too resourced-led? The Russia economy -- I mean,

it's a vast economy in size, geographically, but it needs to diversify the economy.

KOSTIN: It is true, it is true. I mean, it does need. And I think there's a -- we should resolve our issues because I think there are many

more things we can do in the Russia definitely. And even under the circumstances that we have a hostile environment and we have a bad

political situation, I think we still can grow much faster and better.

QUEST: Do you think the west fundamentally misunderstands Vladimir Putin?

KOSTIN: I think so. I think there's --

QUEST: I mean, I'm not suggesting he's sort of a -- you know, goes out and search for animals and is kind to women and orphans. But do you think that

he's demonized unfairly?

KOSTIN: I think it's a basic reason. I think Russia probably doesn't quite understand the western approach and the west definitely, and America

doesn't understand Russia and Putin as well. I think I asked about one American representative here, what was concerned?

They said that the Russian expansion -- Russian expansion. I mean, you can hardly say about this -- what's Russia worth? The Soviet Union was a huge

country, we're now diminished to a much smaller country and we don't have any intention to expand. We are not -- we don't have any military base

around the United States. We are not creating --

QUEST: No, but I guess --

KOSTIN: Any risk -- any risk for it --

QUEST: Ukrainians would say Crimea should -- another one of expansion.

KOSTIN: It's a special issue. You know, it's Russia-Ukraine. It's --

QUEST: Yes --

KOSTIN: Very far away from America, frankly speaking.

QUEST: Choose a color.

KOSTIN: Of course, red, always.

QUEST: You're telling me.

KOSTIN: Every year.

QUEST: Every year --

KOSTIN: I select the same color.

QUEST: Red seems to be very popular. All right, write on the wall what is on your mind, you could write it in English, you could write it in Russian,

whatever your fancy.

KOSTIN: What? To write what?

QUEST: What is the number one --

KOSTIN: Focus, my focus. For me --

QUEST: Your number one worry? Your number one worry?

KOSTIN: I'm not worried. Can I make what I am focusing on?

QUEST: Go ahead.

KOSTIN: It's digit banking. That's the future I think. That's my concern. Not just politics, not any other things, but digital economy and

digital banking.

QUEST: Not climate? Not inequality?

KOSTIN: No, I'll focus on specific things.

QUEST: Oh --

KOSTIN: I can do nothing for climate, but I can do something for digital banking. Thank you, Richard --

QUEST: Good to see you as always --

KOSTIN: Thank you, thank you --

QUEST: Thank you very much indeed --

KOSTIN: Bye-bye.

QUEST: When we return, Germany's economy is growing slower than the glaciers here in snowy Davos. I'll ask the president of the Eurogroup if

he's worried? Axel Weber is also here. We'll get a view on the economy and of course, there's still the world of worries. After the break, digital



QUEST: Here in Europe, stocks were hit by the same growth concerns and the rest of the world. Red arrow across all the major bourses. London's FTSE

was the worst performer of the day. In Zurich, the Swiss market, the Swiss -- and the UBS fell 3 percent after weak earnings.

The company's Chairman Axel Weber will be with us to talk about that, that more importantly, the markets and economies in a moment. First, though,

confidence in the German economy is dwindling fast. A new ZEW survey shows analysts views of the state of the economy are at a four-year low.

The Chinese slowdown, U.S. trade disputes, uncertainty around Brexit all playing a part into that. Mario Centeno is the president of the Eurogroup

and Portugal's Finance Minister and is with me. Good to see you, minister.


QUEST: The amount of problems out there, trying to slow down, worries over trade imbalances or trade world wars and still you've still got some

problems, most notably with Italy in the Eurozone.

CENTENO: Yes, we have been accumulating some risks and uncertainties. Most of them are related with the political decisions that are still up

there and they can be fixed. So I think we need to get a new year of much focus political decisions --

QUEST: Or what, though? What do you want to focus on?

CENTENO: On Brexit, on Italy, on the Eurozone reform that we have to continue this year. So we need to instill confidence in the economy

through the right political decisions.

QUEST: How worried are you of a no-deal Brexit?

CENTENO: It's a very problematic thing if it happens. So we must do all we can to avoid that outcome.

QUEST: Right, but are countries -- and this is where you wear two hats, Portugal and -- you know, if the Brits come to you and say, no, we need to

open up that agreement and take out the Irish backstop, will Portugal agree to that?

[15:50:00] CENTENO: Well, that negotiation is taken at EU level. It's very well structured from the EU side. I think the U.K. also knows

precisely what are the rules of these negotiations, and there is a lot to gain to complete it.

QUEST: Right. The -- an EU budget, a Eurozone budget --


QUEST: You want one?

CENTENO: Yes, I do want one for the Euro. It's a huge --

QUEST: Who would control it?

CENTENO: Currency area -- the governments, of course, the countries. As it happens with the EU, it's very important as a pillar to promote

conversion and some compactness--

QUEST: Right --

CENTENO: In my --

QUEST: Choose your color.

CENTENO: Currency area.

QUEST: Choose your color.

CENTENO: OK, I'll take blue.

QUEST: What's your biggest worry, your biggest worry at the moment?


QUEST: Join us on the board.

CENTENO: I will.

QUEST: Somebody has finally gone for a Brexit.


QUEST: Somebody has finally gone for a Brexit.

CENTENO: This is very important.

QUEST: Not surprised actually, you're in the Eurozone, head of the Eurozone, thank you, good to see you --

CENTENO: Thank you --

QUEST: Thank you sir.

CENTENO: Thank you sir.

QUEST: Take a look around the markets and see the final hour of trade and the Dow is heading for a fall of more than 1 percent. Tuesday is the first

chance Wall Street has had to respond to those lowered estimates for global growth. Speaking at a panel here in Davos, the legendary investor Ray

Dalio said the slowdown will affect the entire world.


RAY DALIO, FOUNDER, BRIDGEWATER ASSOCIATES: U.S., Europe, China, all of those will be experiencing a greater level of slowing, probably a greater

level of disappointment. And I think that there's a reasonable chance, that by the end of that, that the monetary policy and fiscal policy will

have to become easier relative to what is now discounted in the markets.


QUEST: The Chairman of UBS Axel Weber was also on the panel, joins me now. Good to see you.

AXEL WEBER, CHAIRMAN, UBS: Good to see you, Richard --

QUEST: Sir, as always. Let's get your own results out of the way first. What were the factors that influenced these set of results?

WEBER: Well, we're talking about the fourth quarter, but the fourth quarter rounded off a good year. So there were -- we showed the same

weaknesses some of our peers have shown. Trading was born, the investment bank had a difficult quarter, December was quite difficult and we've seen

outflows in vault management.

You know, and so -- but overall, if you look at the year, it was a pretty strong year, good year for us, we've improved our earnings.

QUEST: Can we write off that fourth quarter as being one on its own. And you're not -- I mean, you know, and in late January, but we're not seeing

evidence of similar yet?

WEBER: No, I think, you know, I am quite concerned that the mood here in Davos is way too pessimistic this year. Last year, I was one of the few

that thinks, you know, things won't grow into the sky. This year, I think the market has taken a big swing on the other side.

I think we're really approaching a slowing economy, but we're approaching the slow from above. I mean, we're above potential. We see some soft spot

in the economy, but not more than that --

QUEST: Right --

WEBER: It would probably be worked out in the first half year.

QUEST: The worry is always that slowdowns become more than that. And I'm not -- well, let me use the "R" word --

WEBER: Yes --

QUEST: Recession. I mean, Germany is already teetering, Italy is not doing very well, France is on the verge.

WEBER: Well, I was talking some time ago already about Germany facing a technical recession, which is two negative quarters in a row. But I think

that is really a technical correction. We know good reasons why this third quarter was weak and it had some knockoff effect on the fourth quarter.

If you look at the global economy, I think we're seeing some uncertainties. People are worried about monetary policy tightening too fast. That's a

risk that I think is not really going to be present because central banks look at the data, they will take their time.

The Fed in my view is in a wait-and-see mode rather than continuing tightening. So some of the terrorists I saw in the fourth quarter in my

view are starting to disappear.

QUEST: Do you think the Fed moved too far, too fast.

WEBER: No, I think the Fed was in an environment where growth was very strong and rates were close to zero. They had to normalize rates. The

question is as the economy saw some sign of weakness, especially the global economy, they won't continue that same policy.

What was adequate two years ago and last year is not adequate at this time of the year.

QUEST: Right, and the ECB of course, your friend in the ECB. Their QE is over. The rundown of the balance sheets -- I mean, it should be a

relatively uneventful affair.

WEBER: Well, the ECB in my view would normalize monetary policy in the next cycle. They will not get interest rates out of negative territory in

a weak, also environment. And I think the ECB at best will start raising rates towards the end of this year.

QUEST: This year?

WEBER: At the end of this year -- at the earliest for minus-point 4. But I don't think they will get very far with that. So if you look at the

global economy, there is a soft spot in the economy, and central banks will take a very measured approach.

[15:55:00] QUEST: Do central banks have sufficient resources if things turn worse? Let's say this trade war gets really nasty and Brexit goes over

the cliff. You know, the perfect storm --

WEBER: Yes --

QUEST: And is there -- is there -- what tools are left?

WEBER: Well, what I'm worried about is you already talked about monetary policy as the only tool. The problem is we have no fiscal space left.

Fiscal policy is not consolidated, and we're going to get into a discussion again, but the central banks are the only game in town.

QUEST: Which they will be.

WEBER: Which they will be if they need to be. But I think, you know, you can rely on central banks to do their job, but I would have rather seen

fiscal policy have some room to maneuver because that's a much more --

QUEST: Right --

WEBER: Impactful policy.

QUEST: Choose your color.

WEBER: I'll take the red and I'll highlight that pessimism is our biggest problem at the moment.

QUEST: Pessimism is too much, that's -- good to see you, sir --

WEBER: Thank you very much, Richard --

QUEST: As always, have a wonderful Davos --

WEBER: Thank you very much --

QUEST: Thank you for joining us. We will take a profitable moment after the break.


QUEST: Tonight's profitable moment. It wasn't by accident that the Sydney Snowbot(ph) came along. As you've heard tonight, everybody is talking

about what will happen when the robots take over our jobs. How prepared are we? It's a key issue that is being discussed here in Davos.

It's so easy just to put it in terms of it will be them or us, even with the flashing lights tonight. But the reality is when AI quantum computing

and all these things come along, whose responsibility is it to actually retrain the work force?

And which part of the workforce are going to be most badly hit? Will it be your job gone or mine? Is Sydney(ph) about to start reading the news? We

don't know. But we did know this year when we decided that this was to be our snow-bot, snowman, snowwoman.

We did know that it was crucial because that's the issue that they're talking about here in Davos tonight. Whenever we talk about automation as

you saw it on the world tonight, whenever we talk about automation, we're talking about the future of the working men and women.

And that's QUEST MEANS BUSINESS for tonight, I am Richard Quest in Davos. Whatever you're up to in the hours ahead, I hope it's profitable. The day

is over, the bell is ringing, the Dow is down --


The day is done!