Negative rates help the economy. Trade, brexit and growth put pressure on e. U. Alliances but europes top officials remained resolute. We will be the exporter of knowledge, technologies. Every company should contribute where they do extra in business. Europe and the eurozone in particular have to go a little further. From iran to saudi arabia to south africa leaders spoke to bloomberg about their challenges. Weve already committed to reducing expenditure on a number of fronts. We want to avoid a dangerous escalation. We are flipping the page. All straight ahead on this special edition of bloomberg best. Hello and welcome. Im nejra cehic. On this special edition of bloomberg best, well look back at 2019 in europe, in the middle east, and africa revisiting the most interesting interviews with newsmakers, policy makers and leading figures in business, finance, and politics. Lets begin with brexit. When 2019 began theresa may was facing a march deadline to achieve a deal. By years end, a new British Government was still promising to get brexit done it was a year of negotiation, agitation, and constant speculation as britain and the e. U. Tried to come to terms on a momentous divorce. I think a no deal brexit would be a bad idea. I think its eu. A lot of things would change immediately. We are prepared. We know what is going to happen. There needs to be some kind of extension. The longer the better. So both parties can think about what they are trying to accomplish and what the downsides are. Francine if it does happen, does it freeze markets . It could have adverse consequences we do not expect today. Were going to go to a 24 7 war room status to make sure we are prepared, not just ourselves but central banks, clients, this will have unmitigated consequences we should prepare for. I think under a soft brexit or a hard Brexit LondonFinancial Center status will diminish over time. Technology, risk, credit, regulators will it actually changes the forecast we expect for the Financial Center in london. It will be not quite what it is today. How many questions did you have to field from g20 central bankers and finance ministers on brexit . Do they believe that an extension means that brexit gets watered down . I think most people think, and i agree with them, that the process we have gone through over the last few months has made the likelihood of ultimately a no deal brexit much smaller. And i think we have seen that markets have been pricing on the assumption that a no deal brexit has become a very small risk now. I think thats positive because i always believed we need to leave the European Union with a deal and with a plan that allows us to protect our economy and protect british jobs. So i think the way things have evolved is positive. We have now got to get this over the line. The downside of the extension is we have created a longer period of uncertainty. It is clear that the only way that we can get our economy powering forward is to put this uncertainty behind us and get the deal done and i am confident we will unleash a wall of investment into the u. K. At the moment the Prime Minister has proposed a deal unlike theresa mays deals, this one appears likely to pass the u. K. Parliament if the e. U. Agrees to it. Now in economic and financial terms, it would make a lot of sense in my mind to the e. U. To agree to Boris Johnsons proposal. The question is whether the politics will deliver that. That is what we have to wait and see. Guy the language that he used around no deal brexit, it is very harsh. It talks about no deal brexit being almost a calamity. That is not your assessment. I think its important for International Investors to realize that brexit is a great opportunity for the u. K. , a great opportunity to reboot the economy. Ideally we should leave with the deal, and i think that is the most likely scenario. Were we to not have a deal, rather to have this linger on, i think no deal or clean break becomes likely. Now, i pointed out that a no deal is difficult for those firms and integrated supply chains like the auto and pharmaceutical sectors. But with no deal, it is very opaque at the moment. It is all about how much preparation has been made, how the e. U. Will react and if we were to have a no deal, then there would be a significant stimulative policy response of the u. K. Positive to the supply and the demand side. Really a deal is the most like ly scenario, but a no deal, there has been a lot of misplaced fears. The good news is that there is an agreement between the u. K. And the European Union. As a consequence, would be there would be a transition, an orderly transition to a new economic relationship and we have been saying, the bank of england has been saying from day one after the decision of the people of the United Kingdom to move to a new economic relationship with the e. U. It was important to have a transition to that relationship, and that is what this deal would deliver if adopted. Francine what does that mean for rates . Its hard to distill it down to one thing. The nature of adoption, the timeframe in which it happens. There are lots of potential paths, but transitions better than jumping better than the alternative, and the alternative is a no deal brexit at the end of this month. In general, what we have seen in the u. K. Is that this entrenched uncertainty about trade relationships, and this is the tightest trade relationship in the world, between the u. K and e. U. , this uncertainty is having a consequence for business investment. We think business investment, the level is 25 below where it otherwise would have been postreferendum. Now, if adopted it will remove much of that uncertainty. We would expect a rebound. It will not all come back. Because we do not know the exact nature of the future relationship. The future relationship is to be negotiated, but we do know that the prospect of an orderly transition is put in place. We know the broad contours. In that environment you expect, all things being equal, the economy to pick up from a subdued pace. That makes Monetary Policy more interesting. Tom the citys going to die and move to europe. Thats not going to happen. The city has felt unloved in the last year or two. What the message will be to the government now is you really have to give some priority in the future negotiations to the relationship between the city and the European Union 27. Because at the moment, very little weight has been given to that. More air time has been given to the fish than the whole of the city of london. Nothing against fishermen. It is an important part of the british economy. The next negotiation must include a serious attempt to negotiate some proper mutually regulatory agreements between the city and the rest of europe to allow people carry on trading. Nejra still ahead on the year in conversation in europe, the newly elected president of the European Commission intends to grapple with the climate crisis. Its existential. Theres a huge opportunity. Nejra up next, mario draghi kept stimulus open in 2019 but there was debate on q. E. It was a push back. But it was a constructive one. Nejra this is bloomberg. Nejra this is bloomberg best. We are revisiting the years top interviews on Bloomberg Television in europe. In 2019, mario draghi ended his 8year tenure as president of the European Central bank. He was unable to lift inflation to target and raise rates from record lows. A third of the Ecbs Governing Council opposed the decision to restart quantitative easing. Several skeptical officials spoke exclusively with bloomberg. It was an intensive and also constructive discussion at the council. I could find out how people interacted. Everybody listened to the others. So, it was a discussion in which someone tries to take the other seriously. It was a push back, but it was a constructive one, which one tries to come up with a common solution that everybody agrees with. Not everybody agreed with the measures that were announced yesterday. What was the disagreement . Essentially, it was about the question how effective will a further monetary easing in these various areas be . Is it something we have started to reach the end of, or is there still effectiveness in it . This was a major reason why a pushback took place. The question of quantitative easing moving further into negative territories, will it have an effect on the economic outcomes, or are the risks already higher than the benefit . Or at the level of decreasing further the deposit rate, or what will be the effect on the market Interest Rate compared to doing nothing . Would you say some of the members of the council left thinking maybe we made a policy mistake . We should not have done this. Im sure this idea crossed the minds of some people. It definitely crossed my mind. I myself are a product of democratic culture and football teams. I value team play. In communication, if you are divided, you tend to lose games. If you are united, you tend to score and you tend to win games. Francine there is so much pushback against negative rates. Do we need an urgent policy review . I think its an important issue to discuss. That is something that Christine Lagarde, the next president of the ecb, will decide. My reading is that she has indicated that they started a review of our Monetary Policy. I find it important to analyze long term trends. The lower rate of interest or the population aging, how do they affect the conditions or the operating environment of the Monetary Policy. And what kind of conclusions should we draw. Not to our mandate because our mandate is enshrined in the e. U. Treaty, but our price stability target. I was trying to discuss important and it will also enhance our understanding of our Monetary Policy and improve more conscious communication by the governing council. Nejra later, well hear from draghis successor Christine Lagarde. First, lets hear from leaders in finance around the world who dealt with the impact of negative rates on markets. Starting with the ubs group ceo. I am not very convinced that the medicine that has been prescribed in the past of just quantitative easing is the solution for the problems in europe. We need to go through a more indepth analysis of the steps necessary to create sustainable growth. So we need to have reforms of various level, political, Economic Reforms in europe and the Central Bank Policy can only help in a transition. It is not the solution of the problem. I will be very, very careful about basically growing further the Balance Sheet of central banks, particularly when they start to go into asset base that are risk also. We are at the risk of creating an asset bubble. Its unclear what exactly the additional benefit of this lower Interest Rate is. Nevertheless, if it happens you need to deal with it. It will put additional pressure on the sector in general. We will need to see how the answers can look like. The idea is they have no other choice because of the geopolitical issues and the global trade war, they have to do that to grow the economy. That helps your customers continue in business and do more business with you. Does that make sense to you . That is the core benefit of the last years is. The question is, does an additional point two or point one create an additional affect or are the collateral damages which it produces not just about pension plans, do they really outweigh the positives . Are negative rates helping the economy in general, helping to boost inflation and bring growth back . I think when we look back on negative rates, i think when the book is written it is not going to look like a great experiment. I do not think that negative rates are bringing us the benefit we would like to see. There is no question that growth has been lagging and negative rates have not allowed in acceleration of that growth. I dont think negative rates are really constructive. Well have to wait and see how this all plays out but i worry that when we look back on this experiment of negative rates we will not like what we see when it is all over and all unwound. Negative rates are something which help the economy. Many people criticize the ecb saying negative rates are bad because they negatively impact the top line of a bank. At the same time, negative rates help the european economy to stay at a modest rate of growth. So the provision of banks were going down. Netnet, banks have been decent performers. Maybe now if they are low or negative for longer it would have a slightly negative impact on banks. Francine does this tiering help . It does. Its a marginal help to a certain extent. Im sure the the ecb. And can increase the multiple for instance. Francine would the ecb go into deeper negative territory . Its effectively tiers for the banks. They could. There is some room left. In theory, im sure they would prefer not to do that for many reasons. The efficacy of further negative Interest Rates is questionable. The side effects we know are significant. And i suspect it will not be required in the baseline scenario. I think the preference for the ecb would be not to have to do that. Well see what the macro environment provides. The outlook is not terrible. The market is probably too pessimistic, particularly on price pressures even on inflation, including in europe at the moment. Nejra much more to come, as we revisit the top interviews from bloombergs coverage of europe, the middle east and africa and in 2019. Saudi arabias oil minister spoke frankly about the kingdoms surprising decision to make deeper cuts in oil production. I wouldnt take any corrective measures without consulting with everybody. Nejra and straight ahead, irans foreign minister lashed back against pressure from the u. S. We see the presence of the United States as conducive to greater instability. Nejra this is bloomberg. Nejra this is a special edition of bloomberg best. Were highlighting conversations from 2019 on business, finance, and politics in europe, the middle east, and africa. As irans economy struggled under the weight of u. S. Sanctions, tensions ratchet it ed up in the persian gulf. There were several incidents involving the movement of oil tankers. Iran said it could disrupt access to the strait of hormuz. The foreign minister shared irans perspective in a conversation with bloomberg editor in chief john mickelthwait. We understand, we feel the danger, and that is what we want to avoid a dangerous escalation. But we cannot give up defending our country. John your revolutionary guard has said it can close the strait of hormuz. What would be the situation what it would do that . We certainly have the ability to do it but we so we do not want to do it because strait of hormuz and the persian gulf are a life line. We play a major role in securing it. It has to be secure for everybody. John a lot of people would say that the big issue in that region is not so much america and iran, its saudi arabia and iran. Well, unfortunately, saudi arabia believes they can purchase their security and they pay as a commodity and they buy. They are willing to fight all of their problems until the last american soldier. John the saudis have hired americans as mercenaries. That is how they see it. John do you see america as the saudis mercenary force . That is how they see it. We see the presence of the United States as conducive to greater instability. It exacerbates tension. It creates a false sense of security for its clients who believe they can get away with murder, literally, as they did with a brutal murder. They do get away with murder of innocent civilians in yemen on a daily basis. John theyve made no secret of the fact that they want to see regime change. Would you like to see regime change in saudi arabia . No, we dont. John why not . We believe it is the business of the saudi people to decide about their government and we do not have any alternative to the current ruling regimes in the region. And that is not of our business. Its the business of the people to decide. We do not want to see regime change in any country. We are a status quo power. Were content with our size. Were content with our population. Were content with our resources. Were content with our geography. We dont seek anybody elses territory. We have no eye on somebody elses resources. They can live happy ever and after, if they wish to live in peace with their neighbors. The problem is they are not living in peace. Its not iran. If you want to look at malign behavior, you see that everybody in the region, everywhere where we have a problem, you have a saudi footprint, you have a uae footprint. Not everywhere you have an iran footprint. In libya, industry done you have a saudi and a uae footprint. You do not have an iran footprint. If you want to look at malign behavior, you have to look elsewhere. Nejra the year in conversation continues. Europe found itself facing the threat of u. S. Auto tariffs. The e. U. Trade chief spoke to bloomberg. We were trying to develop a positive agenda where we stated we would not impose new tariffs on each other. Nejra and Christine Lagarde moves from the imf to the ecb. She explains her leadership philosophy. Speaking in plain and simple language is the best way to help people with you and then taking ownership. Nejra this is bloomberg. Beyond the routine checkups. Beyond the notsoroutine cases. Comcast business is helping doctors provide care in whole new ways. All working with a new generation of technologies powered by our gigspeed network. Because beyond technology. There is human ingenuity. Every day, comcast business is helping businesses go beyond the expected. To do the extraordinary. Take your business beyond. Nejra this is a special edition of bloomberg best. Were wrapping up 2019 by playing back the years top interviews. When the u. S. Threatened to impose tariffs on auto imports, an eu trade commissioner promised to retaliate, but in a conversation with bloomberg in may, she made it clear she was not seeking out a confrontation. We have an agreement between European Commission president juncker and the u.