Hello and welcome to todays edition of Worldwide Exchange. From davos, im Ross Westgate. Im kelly evans in london. These are your headlines from around the world british Prime MinisterDavid Cameron promises to hold a referendum on the e. U. Warning that a concession for the democratic leadership is wafer thin. If we dont address these challenges, the danger is that europe will fail and the british people will drift toward the exit. Google could light a fire under u. S. Markets today as the giants Fourth Quarter profits top forecasts on higher ad revenues. And here in davos, bank ceos fight back against regulators in an exclusive cnbc debate, apologizing to scandals of the past but defiant it the role of the industry. I think theres so much misinformation out there thats used aggressively by people for their own purposes. We provide a service to you. We make a little money every time we do it. Thats what happens. And ceo confidence down for a third year in a row according to a survey here. Despite markets hitting multiyear highs with lack of decisions in the u. S. Weighing on sentiment. Okay, hello and welcome to the start of our coverage from the annual meeting of the World Economic forum here in davos. Day one of three come. Kelly, i could tell you things already warming up. Weve had a great debate already amongst ceos. Well get more on that. How are thing there . Pretty good. Weve been listening to David Camerons speech. Its interesting he chose today for the timing. You see cameron on the one hand, Bank Executives on the other hand. Its like a confluence of events coming together. Whats the mood out there . What are people most gossiping about . Well, obviously the british ceos are keeping an eye on what David Cameron is saying. We know big business broadly supportive, trying to keep a strong role in europe. We know from the bcc survey. In terms of commerce, a lot of smaller smes want big renegotiations. David camerons got to tread the path between business. Here weve got conflicting signals. I mentioned the survey and headlines. The pwc survey suggesting ceos less confident than last year. Weve also got the survey that Steve Leesman came up with, the phrase i like, precarious stability. This is the first time, as he puts it, that were meeting in davos without an imminent crisis upon us. We know the impact of the ecbs otr suggestions. We know the money that other Central Banks are putting in. Were through the u. S. Elections, ahead of the debt ceiling debate. In some sense there isnt an immediate crisis. Its a question now whether ceos can get through the real economic fundamentals. In some ways were betwiked and between, kelly. I like the scarf, ross. Yeah. Thats the point. Look, theres plenty to come on our coverage today. Let me recap some of the people were going to be talking to. John lipinski, formerly of the imf. And hamish tyrwhitt, Construction Group out of australia. We saw rates dip a little today. Suggesting theres room to cut rates. And the executive dean of peking university. Were more relaxed about china, more relaxed than three or four months ago. Well get the inside there. All of that is coming up on todays Worldwide Exchange. How are the markets looking . Perfect. Well check the markets in a second. I want to bring news out of the bank upon spain saying Fourth Quarter gdp was down 1. Not 1. 7 drop, it was. 6 drop. Pretty large. And 2012 gdp down 1. 3 , down from a contraction of 0. 4 in 2011. More difficult news for the spanish economy. Now in a longanticipated speech on the future of britain in the European Union, Prime Minister cameron has warned that democratic consent from a u. K. Membership is wafer thin. Speaking in london, he said hes in favor of having e. U. Referendum but not at the moment and urged e. U. Leaders to address the challenges currently alienating the electorate. Theres a gap between the e. U. And citizens which has grown dramatically in recent years and which represents a lack of democratic accountability and consent that is, yes, felt particularly acutely here in britain. Now if we dont address these challenges, the sdarj that europe will danger is that europe will fail and the british people will drift toward the exit. I spoke to unilevers paul pohlman to get his thoughts on the strained relationship with the European Union and whether a potential u. K. Exit is bad for business. If you create a certain level of uncertainty between now and 2017 or whatever the date is of a proposed referendum if this is what comes out, you create a period of uncertainty that is not to the benefit of business. Some caution there which as ross was saying weve also been hearing out in davos. And our team out there has been asking Business Leaders how they think britains role should play out. Ross, what more can you tell us . Look, a mixed set of opinions really, kelly, already. I suggested a difference between the big conglomerates and smaller business. Lets hear a recap of some of those thoughts. What it does is introduce the introduces a fifth one. Weve got enough uncertainty. Maybe eurozone is better under mario draggys leadership. I see the u. K. s future being in europe, but i accept that it is going to have to somewhat change the nature of that relationship. People have really tired of europe. Even many proeuropeans just feel brussels isnt delivering. Some of the thoughts already expressed this morning. Its only the first morning of our coverage. Joining us for the next halfhour im happy to say, if you can stand the chill, well warm things up, steven king, global chief at hsbc. Cant believe were back again. As always, the focus on things going on outside davos. What do you make of David Cameron . The speech kind of as expected. What is this doing, this Political Uncertainty . Well, he want to resolve the uncertainty by saying we need a referendum to once and for all sort out the european problem. The difficulty is the referendum, if it ever does happen, will happen after the next election. You have to see who will win the next election, also big uncertainty. Bear in mind the labor and the polls absolutely. And you would have to have negotiation with europe before you put the negotiation to the referendum. It may be that the rest of europe wont agree to the negotiation that they want to have. In one sense the promise is there. But will it materialize is still, i think, a tricky issue. Tim standly made this point which kelly pointed out, im going steal her thunder, sorry, kelly, saying that the speech to him sounded like it was to brussels and it was really the referendums being used as leverage to gain concessions rather than actually anybody wants to sort of press ahead with my impress is that cameron himself is a believer in europe. Hes got a problem in the sense that his party is split as it always has been in terms of its attitude toward europe. He wants to heal rifts in his party and bring supporters back to conservatives who shifted across to the u. K. Independence parties. He needs that, as well. Hes got one eye on winning the election and hopes by making the promise of having a referendum in the future that maybe conservative support will go up. The British Chamber of Commerce Survey a couple of weeks ago, 47 of their members, they polled, want a looser relationship. Only 27 want the status quo. Clearly theres a pig chunk of british small and medium size businesses that believe the e. U. Is a burden. I think they did. But at the same time, i think that businesses in general have not been particularly quick to grab the opportunities that exist outside the European Union. One of the fascinating things in britain about europe is actually our trade linkages with europe have grown enormously over the last 25 years. Whereas trade linkages with china, india, or parts of the, merging world have if anything actually fallen away over the course of the last 25 years or so. So opportunitys been this to grab elsewhere in the world but havent you make a good point. If you spin forward not five years or ten years, you spin forward 15, 20 years, if youre running u. K. Plc and are going to set out a strategy, how different is the world going look in terms of size of economies and who you would decide today in 20 years should be my biggest trading partners . If youre planning now, thinking about china, india, brazil, you wouldnt be thinking quite so much about whats going on elsewhere in the European Union. The reality is that with the European Union, we become more engaged with im and disengaged with other countries. The peculiarity is that if you look at examples of germany, france, or italy, theyve increased their exports to parts of the emerging world. Been successful in some cases, particularly in germanys case. But actually at the u. K. , its been slow to grab the opportunity. All right. Weve got mints coming up later. Well minutes coming up later. And people writing about whether sterling upon sterling will look weaker. And this week well run an online poll, as well. When it comes to europe, do you believe lack of the Current Crisis mentality is a sign of Real Progress or, b, only temporary . A, sign of Real Progress, b, only temporary. Go to our web page, www. Cnbc. Com. Tweet Ross Westgate or kellyevans. Well close it by the end of the week. Kelly . Thank you very much. Lets check as he suggested global markets. Theyre trading amid all of the news flow. The europe stock 600 for the most part trading lower. Decliners are outpacing advancers by a 73 ratio. Overall the move down 0. 06 . This follows a session where we did see stocks end lower. The nikkei in particular. First, lets focus on the borces in europe. The cac cac down. 2 . The ibex giving up. 5 . The xetera dax, the weak performer yesterday, trying to rebound. Barely above the 7,700 level, adding. 1 . And the ftse up. 1 . Perhaps reaction to David Camerons sp or given the cross currents that were seeing coming out of the u. S. In particular. The bond space gives you a sense of also what were seeing, and its differentiated trade again. Its been consistently inconsistent for the last several trading sessions. Were seeing spain rally with the yield going to 5. 12 . Italy weaker with the yield rising to just over 4. 2 . The yield over 1. 2 and the bunds, 1. 5 . In asia we have the latest on how the nikkei is responding in the aftermath of the bank. Japans major of japans addition is settling. The nikkei got walloped, down more than 2 to a threeweek low. The yen strengthened as investors pounded a yearlong wait for hoef hype ended stimulus. Financials were weakly today. The shanghai composite finished in positive territory. Defense stocks soared as many are still hoping these stocks will benefit from beijings plan to strengthen its military after territorial disputes simmer on. Shares in hong kong finished a touch weaker dragged by industrials and growthsensitive counters. And investors closely watching that hsbc china pmi data out tomorrow. The kospi ended down. 8 mostly on concerns over domestic q4 earnings. Technology shares retreated ahead of apples report card due out later today. The afx 2 asx 200 closed at the highest level in 21 months. The h. P. Bulletin gained after a half a year of iron ore output. Nation data raised chances of nation data raised chances of another rate cut next year. Thanks. Ross . Thanks. Print more to come on Worldwide Exchange. Coming up, a little bit later well be joined by john lipski, former director of imf. Well get his views. Deputy managing director. See you in a few minutes. What are you doing . Nothing. Are you stealing our Daughters School supplies and taking them to work . No, i was just looking for my stapler and my. This thing. I save money by using fedex ground and buy my own supplies. Thats a great idea. Im going to go. We got clients in today. [ male announcer ] save on ground shipping at fedex office. The big debate this morning was the cnbc debate hosted by our own Maria Bartiromo entitled the Global Financial context, some of the biggest plays in davos from the world of finance. Were in it. Lets bring a recap of what they said. I think the industry has to come back from the past. I think a lot of companies are doing fine. You know, banks continue to lend and grow and expand. Finance is a critical part of how the economy runs our functions. Youre going to have loans and movement of money and investors and, you know, presumably everyone i know is trying to do a very good job for their clients. Banks since the crisis jpmorgan since 2008 has lent or raised 7 trillionplus for people. All around the world, including governments, schools, cities, hospitals, small businesses, large thats our job. We try to do it very well. The whale mistake up there no customers, wasnt venal. Terrible mistake, if youre a shareholder, i apologize deeply. We did have record results, life goes on. When i came to the industry, i was under no illusion that the industry didnt have its issues. They need to be fixed. And what we tried to do at ubs is two things. First, i think banks need a new strategy. And we embarked on a bold new strategy for ubs. The right strategy. At the same time we need to deal with the legacy. To get on top of the issues, you need to get to the bottom of things. For us, a settlement of libor was an important step in going in that direction. These things need to be on the table. Taxpayers want to know about it. And transparency simply has to be there. When we found this issue going on in the bank, we completely made contact and complied with the regulators. We had a very good interaction with regulators, we helped them separate from staff that basically was involved in misconduct that is completely unacceptable. Its not the values of switzerland, its not the values of something we can tolerate. You need to separate from that past. Thats a necessary condition for the bank and for the industry to focus on a better future. And you have to do both. Shape the future with new strategies at the same time, basically get out all the issues from the past. There have been excesses. There have been problems in the good years. What we need to do is fix those and then move forward in a in my view, different mode. I think were still doing the right thing. Were taking risks to do that. So i just i think theres so much misinformation out there thats used aggressively by people for their own purposes. Paul, you trade with us, right . Quite a bit. Very happily. Why you do that . Research, execution, capital, and price. We provide a service it you. We make a little bit of money every time we do it. Thats what happens. And and the fdic for the folks in the room, the fdic insurance guarantee, okay, is paid for by banks. So yes, its a government guarantee. But Jpmorgan Chase has paid the fdic, will pay over a fiveyear period 5 billion to pay for the failure of small banks. So its not that one side of the street. Its great to have the opportunity to continue my conversation with jamie in this intimate setting. I appreciate that. [ laughter ] and hes right about in a way, about the opacity of hedge funds. I would remind everyone that no hedge funds supplied any Systemic Risk in the 2008 crisis. Its for a specific, important reason. Most of us, almost all of us in the Hedge Fund Community and i dont dayeign for hedge fundsr the industry, but most of us are customers of firms like jamie and dr. Webers. And as such, we have credit departments looking over our credit and positions all the time. What the 2008 and jamie, of course, runs one of the most widely respected large Financial Institutions in the world. But what 2008 showed is that many Financial Institutions didnt actually have a handle on, nor did their regulators, on the nature of their risks and the risk models that were being used. Were not adequate were not adequate to describe transmissions. Im not saying that the institution or group of institutions is unsound and all of the things that jamie said about the risks that they take and the services they provide as well as his colleagues of course is accurate. What i am saying is the path to normalization and a Crystal Clear able of Global Financial institutions to exist outside of an implicit governmental guarantee partially partially is dependent upon more deleveraging, more disclosures. So vigorous debate going on there as youve been listening as i have. I cant speak, you see. I have, as well, is what i wanted to say. I know your lips are probably frozen from standing out there. You know, whats interesting is that it was nice to see different kinds of people in the industry talking to each other about these issues. We also had comments about shadow banking, the dangers. I liked jamie dimonds quip about the Banking Industry there. Yeah. What caught your attention, though . I just think look, Everybody Needs a healthy financial system. I dont think weve still quite got our heads around the dichotomy of saying we want to build toward a more stable financial industry, higher capital. Better regulation. I think we need more regulation but better regulation. I still dont think weve worked out how to transition to that future at a time when we still actually need, clearly, a lot more help for businesses, a lot more access to funds. And i still think were working our way through those things that are seemingly in opposite to each other. Its interesting, ross, too, because as you said were moving out of the ac