Graeme Wearden in Davos 

Davos 2017: Hammond fires Brexit warning; Kissinger says Trump must help rebuild world order – as it happened

UK chancellor tells WEF that Britain will reinvent itself if it has to, as Davos ends with comments from veteran diplomat Henry Kissinger
  
  

Former US secretary of state Henry Kissinger delivers remarks by video link on the closing day of the World Economic Forum.
Former US secretary of state Henry Kissinger delivers remarks by video link on the closing day of the World Economic Forum. Photograph: Fabrice Coffrini/AFP/Getty Images

Oh, one last thing. You’ll never guess which Davos regular has just landed a swanky job.....

Closing summary

Our work here is done. Thanks for reading and commenting through the week.

Here’s Larry Elliott’s news story on today’s key developments:

Here’s what we learned in Davos this week:

Tschüss!

The World Economic Forum is wrapping up now, which is just as well as my laptop is seizing up after a week of constant activity.

The co-chairs of this year’s event have been speaking; Save the Children’s Helle Thorning-Schmidt cites Tuesday’s speech by president Xi as a key moment:

Kissinger: Trump must help create new international order.

Perhaps the most interesting part of Kissinger’s appearance was his advice to Donald Trump to redefine America’s role in the world.

Here’s the full quotes, courtesy of CNBC:

“One of the major achievements or impacts of President Obama was to withdraw America from some positions in which it was overextended but also to create the feel that America was withdrawing from the world even in places in which over extension would not apply and where its contribution remains essential.

“So President Trump will have to find a definition of the American role that answers the concern of many parts of the world that America was giving up its indispensable role of leadership in many countries - and major contribution in others - and define what and where America can lead and where it must contribute and in that help in the creation of an international order.”

On Brexit, Kissinger says it could be used in a creative way -- to create Europe and America in the Atlantic partnership.

It could seek to address the problem that some of the key issues in Europe, such as the economy and security, are very difficult to solve in a forum where unanimity is the absolute requirement.

One answer could be to create subgroups on issues like finance and security, where decisions could be made on the basis of support from countries who would carry the greatest burden, Kissinger continues.

In such a system, Britain could reenter Europe, and play a function linking Europe and America.

This could allow countries to act with the same “moral conviction” as we saw in the early days of the Atlantic Alliance.

The Atlantic Partnership is crucially importance, says Kissinger, in avoiding a return to the problems that used to characterise Europe.

It needs to be reconstructed, but with the attitude that it is the key element of both US and European policy.

On the Middle East, Kissinger says it is important that progress is made at the Syrian peace talks in Astana, as a precursor for further progress.

Those talks start next week, and are organised by Russia and Turkey.

Any solution will have to include the United States, he adds.

Q: What advice would you give president Trump about Russia, if you were secretary of state?

America and Russia seem to be making the worst assumptions about each other today, Henry Kissinger replies.

Trump has spoken about de-escalating the tension in the relationship, and Kissinger agrees with this ‘general attitude.

I think Russia is a country with a very special history - 11 time zones, touching Asia, he Middle East, and Europe, Kissinger continues. It has been the cause of many tensions, but also maintained the equilibrium in the world

Q: What advice would you give president Trump?

President Trump must find a definition of America’s role in the world, and decide in what way America can lead, what it can contribute, to help create an international world order, Kissinger replies.

Updated

Kissinger addresses Davos

Henry Kissinger is now joining the delegates at Davos, by video link, to discuss the state of the world today.

He starts by paying tribute to Shimon Peres, the Israeli statesman and Davos favourite who died in September 2016.

Q: What conclusions do you draw for President Xi’s speech on Tuesday?

Important assertion by China that it will participate in the construction of a world order.

The world order which we were familiar is disintegrating in some respects, Kissinger says.

President Xi has put forward a concept of international order that must be discussed, Kissinger adds.

Rosberg is telling an audience in Davos about what it takes to make it to the top.

He says failure and suffering can be a “gift”, depending on how you look at it.

Losses, failure, are not always a bad thing. They can help you. I can look back [at my career in F1] and say I’ve ticked all the boxes.

I find that life has more to offer than driving around in circles.

He says that among the things that helped him succeed in his F1 career were jet lag training and keeping his family life simple.

This year I realised how much my private life had an impact... simplifying it so that it took the least possible energy from me, so that I could 100% focus on the job of racing. It really made a difference.

Updated

F1 champ Rosberg is giving an interview at Davos. Watch it here.

WTO chief warns against 'talking ourselves into a crisis'

Roberto Azevedo, director general of the World Trade Organization, is concerned about the tone of some of the conversations at Davos.

Specifically he’s concerned that talk about protectionism and trade wars could lead to a crisis.

Speaking after a meeting of trade ministers at Davos, attended by 29 WTO members, he said:

I’ve heard a lot in Davos about trade wars. That would destroy jobs, not create jobs.

We must definitely avoid talking ourselves into a crisis.”

Updated

The BBC’s Call the Midwife gets a mention by the Davos (non Brit) panel on the hospital of the future.

Elizabeth Nabel, president of Harvard-affiliated Brigham and Women’s Health Care describes the programme as “charming” as she discusses her belief that health care should be provided as much as possible at home in the community.

As the world’s political and business leaders debate inequality and globalisation in Davos, Harrods is making some changes after it was criticised by a union.

The luxury department store has agreed to let staff keep 100% of the money raised from restaurant tips following a campaign by the United Voices of the World union.

Previously the retailer kept 50% of the discretionary 12.5% service charge automatically added to diners’ bills. It is also reducing its service charge rate to 10%.

The Guardian’s Zoe Wood has the full story:

Away from Davos for a moment, but on the subject of Brexit, the Gambia’s new president has been speaking to Sky News:

The panel on the hospital of the future is underway.

Panelists are pondering what a hospital in a major city is going to be like in 2027.

The broad conclusion is that it’s going to be very different. Shamsheer Vayalil, managing director at Abu Dhabi based VPS Healthcare, says that in 10 years time, there won’t be standalone hospitals. There will be gyms, cafes, business meetings in the same place.

Larry Elliott, the Guardian’s economics editor, has the full story on how the chancellor, Phillip Hammond, is blaming Tony Blair for Brexit:

Third time lucky?

Currently underway is a debate on mental health and what might be done to mitigate the consequences of mental illness.

Also coming up:

  • The hospital of the future at 13.00 UK time
  • The global security outlook at 14.15 UK time
  • A conversation with Nico Rosberg, 2016 Formula 1 World Champion at 14.30 UK time
  • Henry Kissinger on the world in 2017 at 15.30 UK time

Stephen Lewis, chief economist at ADM Investor Services, says it is not surprising that the German Chancellor, Angela Merkel, and the French President, François Hollande, have chosen to stay away from Davos this year:

It is not difficult to understand why, for some European leaders, Davos is now a no-no. To be seen by their voters junketing with business chiefs in a luxury resort would merely serve to heighten the populist rage that has been shaking the foundations of the political order in Europe.

Admittedly, [UK prime minister] Mrs May addressed the meeting but she was in the special position of having a job to do to persuade corporate managers that Brexit would not render the UK a less friendly environment for business.

The most significant political attendee at this year’s event, he says, was China’s leader Xi Jinping:

President Xi’s attendance was perhaps the most significant of these political comings and goings, though. Beijing surely recognises that Mr Trump’s approach to international trade could well result in the reversal of the globalisation process that has so favoured China’s economic development.

By presenting himself as the champion of free markets, he was probably hoping to win good will towards China among the multinational globalisers.

The World Economic Forum is not giving up on the idea of globalisation that works for everyone:

The panel ends with Christine Lagarde, IMF chief, urging advanced economies to do more to support the developing world.

She says:

Growth is not sustainable if it is not inclusive.

She singles out Britain’s commitment to spend 0.7% of its GDP on overseas aid.

All countries should adhere to that target, and do more to help.

Otherwise we will be dealing with massive inequality issues at all levels.

Schauble: Brexit cliff-edge would be a disaster

Q: There is concern that there might be no agreement, two years after triggering Brexit, leading to a cliff-edge. How concerned would you be about that?

Wolfgang Schauble says it would be “a disaster for all of us if that happened.”

He adds that he is “totally convinced” London will remain an important financial centre for Europe after Brexit.

And he believes that a deal can be done in two years.

Updated

Wolfgang Schauble isn’t convinced by Hammond’s threat to leave the economic mainstream.

The Financial Times’s Martin Wolf, who is moderating the panel, asks the German finance minister to comment on the idea that Britain will become “Singapore on Thames”

Schauble says:

I can’t see that the UK, this great nation, would compare itself with Singapore.

If America aggravates some of our largest lenders, and raise our deficits, quite frankly that puts even more pressure on the dollar, Larry Fink adds. That’s a very hard thing to navigate.

He explains:

Right now the biggest lender is Japan, the second biggest lender is China.

We need to be paying quite a bit of attention to our relationships worldwide, as the biggest borrower in the world.

Larry Fink, the head of US investment group BlackRock, says the election of Donald Trump and the Brexit vote have both had an immediate boost to consumer optimism.

These votes have had an immediate impact on families, they feel they have a voice now and their voice has changed policy, so they’re feeling happier and spending more.

Whether they are right or wrong they think the old policies were wrong for them. We’ll find out if they’re right, Fink says.

Hammond: Britain would quit economic mainstream without good Brexit deal

Philip Hammond then warns his audience at Davos that Britain could quit the economic mainstream if it doesn’t get a comprehensive free trade agreement with the EU.

Our “strong preference is that we remain within the European economic mainstream”, with reciprocal access to each others markets, and Britain “continuing to operate to European norms and regulatory standards,” says Hammond.

However....

But if we are driven out of that market, and denied access to our most important market, we will reinvent ourselves and find a new way of being competitive.

Hammond reminds us that Britain already works longer hours, to ensure that our lower productivity doesn’t undermine competitiveness

He doesn’t spell out what the ‘economic mainstream’ means, but I think he’s hinting at lower corporate tax, a bonfire of regulations and other measures to make Britain more attractive to companies.

Hammond: Blair caused opposition to EU migration

Philip Hammond goes next.

He says Britain has confounded sceptics who thought the British economy would suffer an immediate shock after voting to leave the UK.

He repeats his prediction that inflation will rise this year due to the depreciation in the pound.

And he then lays into Tony Blair for allowing citizens from the eight eastern European countries who joined the EU in 2004 to have full access to Britain.

It is important to understand the drivers of the Brexit decision, Hammond says.

They are not “one and the same” as the drivers that led to the election of president Trump.

There was no anti-trade or anti globalisation rhetoric in the campaign - one of the central tenets of the Leave campaign was that Britain should do more trade with the rest of the world.

Hammond says:

It was absolutely the opposite of the anti-trade rhetoric that we heard in the United States.

But what there was clearly was a strong strand of feeling against uncontrolled migration.

And I lay the responsibility for that squarely at the door of prime minister Blair who failed to impose transitional regime in the UK in 2004

So while other countries in Europe smoothly transitioned the A8 members and the freedom of movement from A8 members

Britain took the full force of the tide in 2004, and that created a public perception which we still haven’t shaken off to this day.

Germany’s finance minister, Wolfgang Schauble, says Germany would suffer if there was a decline in free trade.

Brexit will not have a big impact on the German economy this year, though.

Christine Lagarde speaks first.

She says there are good signs in the global economy - for a start, the IMF isn’t revising down its growth forecasts any more

Global growth is expected to rise from 3.1% in 2016 to 3.4% in 2017 and 3.6% in 2018.

Japan is getting stronger, and Europe is in a recovery cycle.

And the IMF has revised up the US, because of Donald Trump’s proposed tax reforms.

However, it’s not clear how this fiscal stimulus will be combined with trade treasures, Lagarde warns.

This is “Something to be explored and probably not overall a net positive”, she warns.

Live feed: World Economic Outlook panel

Philip Hammond has now hotfooted it across the conference to join a panel discussion on the global economic outlook, with IMF chief Christine Lagarde, Japan’s central bank chief Haruhiko Kuroda, Wall Street titan Larry Fink and German finance minister Wolfgang Schäuble.

Here’s a live feed:

Updated

UK retail sales fall sharply in December

Official figures for the how UK retailers fared over the crucial Christmas period are out and will not make pretty reading for the industry.

Contrasting with the largely upbeat tone of retailers’ trading updates, the official statistics suggest retail sales volumes dropped 1.9% in December from the month before. That was the biggest drop since April 2012 and far worse than forecasts for a 0.1% dip in a Reuters poll of economists.

But taking the final three months of the year together retail sales were up 1.2%, the Office for National Statistics said. That will buoy hopes that consumers continued to drive a pretty solid pace of overall economic growth in the fourth quarter.

Commenting on the figures, ONS senior statistician Kate Davies said:

Retailers saw a strong end to 2016 with sales in the final quarter up 5.6% on the same period last year, although the amount bought fell between November and December once the effects of Christmas are removed. There were some notably strong figures from smaller retailers, in particular butchers, who reported a significant boost in sales in the run-up to Christmas.”

Alan Clarke, economist at Scotiabank, called it a “disastrous December” and pointed to the effects of a pick-up in inflation last month.

We know from the CPI [inflation] data earlier in the week that prices rose more than expected in December and now we also know that sales volumes fell. This is likely to be the theme for the rest of the year - higher prices will reduce disposable income and hurt consumer spending growth.”

The pound has dropped on the news and is currently at $1.2290, down 0.4% on the day against the dollar. It is down 0.3% against the euro, at €1.1542.

Updated

Hammond: UK may need interim deal

Another interesting angle – Hammond told the panel that he thinks the Brexit deal can be done in two years, but there might have to be an ‘interim’ arrangement if a final trade deal isn’t ready.

Updated

Here’s Reuters’ take on Philip Hammond’s migration comments:

British finance minister Philip Hammond said on Friday it was an “open question” whether migrants from the European Union would enjoy easier access to Britain after Brexit than those from other parts of the world.

“That could be a subject for the negotiations. What we have said clearly is that we cannot accept the principle of free movement,” Hammond said in response to a question at a panel discussion in the Swiss ski resort of Davos.

Hammond: Inflation is going to go up

Could Britain leave the EU and rejoin in the future?

Hammond thinks this is unlikely, as it would mean joining the euro - a red line issue for the UK.

And he warns that the slump in the pound is going to push the cost of living higher.

British people are starting to feel that through increased inflation, and we’ll see more of that through this year.

That’s the mechanism that allows economic shocks to be handled in a smooth way.

Hammond was also asked about the issue of EU citizens currently living in the UK

He says Europe rejected the idea of an immediate reciprocal deal, because nothing can be discussed until everything is discussed.

The 2.4 million EU citizens in Britain are welcome, Hammond says. Provided we can be assured of a reciprocal deal for the 1.2 million UK citizens in Europe, it will be settled.

More Hammond:

On to geopolitics.

The change of administration in Washington is a very big issue for the UK, and has introduced even more uncertainty for the EU than Brexit, Hammond continues.

And the crucial issue is Europe’s relationship with Russia, and the question of whether the security provided by America changes.

It is not an exaggeration that for some eastern partners of the EU, security is a much bigger issue than economics.

Updated

We want to find the best people from around the world, Barclays CEO Jes Staley tells the panel.

One of the reasons for the City’s success is the acceptance that financial companies can being talent from anywhere. Staley doesn’t think the UK people want that to stop.

Mario Monti says there has been “a fundamental change in a small time” in Britain’s attitude to EU migration.

He reminds us that the UK was one of the members pushing to allow more countries to join the bloc a couple of decades ago.

The two are linked, Philip Hammond shoots back.

The attitude in the UK now on EU migration is absolutely for sure derived from the mistake that Blair made to open the floodgates in 2004.

Hammond: We need migrants but can't accept free movement

More from Hammond on migration:

What we’ve said clearly is that we cannot accept the principle of free movement.

Any EU national can simply change his place of residence from Bulgaria or Romania to the UK, Hammond adds, and we can’t accept that any more.

But the UK will still need migrants for its economy, and it will still welcome them.

Hammond insists Britain isn’t anti-migration.

There might be a few people in the UK whose view is the migrants don’t come in, but it’s absolutely not the majority view, he says, adding:

It is very important to the British people that we control our borders, but most of them do not want to use that control to shut the borders, they simply want to have the control.

Updated

Woods: Migration controls on students risk 'kneecapping' UK

Professor Ngaire Woods then gives a passionate call to the government not to include students in its migration controls.

She says that Britain needs to be at the front of the knowledge economy to succeed. Oxford is fighting against top US universities to attract the best students, and Brexit could make this much harder.

If we have a tone in Britain that it’s less welcoming of immigrants then it can’t attract the best talent in the world then it doesn’t become Global Britain, it becomes Doors Shut Britain.”

Woods says we should see overseas students as purchases of Britain’s ‘fantastic’ education services, rather then including them in the immigration numbers.

If we make them part of Britain’s immigration debate we’ve smashing our own kneecaps before even beginning the race....

Don’t kneecap your best asset. Let us thrive, make sure that immigration policies tell the world that Britain is open and welcoming to the best most entrepreneurial, energetic talent from all over, without restraint and constraint.

Updated

Ngaire Woods: Brexit gloating isn't helping

Professor Ngaire Woods, professor of global economic governance at Oxford University, tells the Davos panel that successful Brexit negotiations can’t be done in two years, and criticises the “gloating” among leave supporters.

Woods says that May and Hammond are taking a positive, constructive approach – but not everyone in their party is taking the same view.

There are still factions that are gloating about Brexit – and that unfortunately takes an unconstructive tone.

That’s because the Brexit vote caused the sterling devalation giving an immediate boost to exports, but the costs of a hard Brexit won’t be felt for two years.

Politically, this is a big call on both sides, Woods continues.

The cool constructive approach that the PM and chancellor are taking needs to quickly infect all their party and people who supported Brexit.

And she warns that the two-year timetable laid out under Article 50 may not be achievable.

“The ideal would be a 10 year period in which you could put each piece together and end up in a Churchillian world of a more coherent EU without Britain, and Britain as a constructive friend sitting alongside it”.

Updated

Mario Monti, the former Italian PM and European commissioner, is also on the panel - and is roasting David Cameron for calling last year’s EU referendum.

Monti starts by welcoming the “clarity” that Britain has given about its Brexit plans in recent days.

But then he attacks Cameron for calling the referendum “in the interest of his position in his party”.

“He put his country and the whole of Europe on the line to achieve this”

The consequences have been rather devastating, not only for him personally but because the whole political system in the UK has been blocked, paralysed and made uncertain.

This means that other European leaders who play the game of attacking the EU for personal interests will “find it an admonishment to be a bit more careful”, Monti concludes.

Updated

Hammond adds that it would be economically “sub-optimal” if countries and companies had to start precautionary spending in case Brexit turned out badly.

For example, France would also have to invest in new systems at its own borders.

Hammond: Hope for constructive talks with EU

Philip Hammond starts by telling Davos that Theresa May’s Brexit speech on Tuesday was an important step forward.

We’ve now set out an agenda that lets this become a shared problem that has to be solved.

One of the key challenges is the ‘pretty rigid’ timetable laid down by the EU treaties, the chancellor says.

He still expects to serve the Article 50 notice by the end of March, whatever the Supreme Court rules next week.

Hammond says there are many issues to consider; Britain will need significant new infrastructure at our borders if we change our customs arrangements, and new IT systems if the migration rules change.

Hammond says that he hopes to begin “constructive engagement” with the EU once the Article 50 notice is served.

It will become clear, I hope pretty quickly, that there is a shared ambition to get to an end state arrangement that will mean maximising the reciprocal access to each other’s markets and the level of co-operation across this range of non-economic areas as well.

That means the fog gradually clears, and businesses have more certainty, Hammond adds.

Philip Hammond’s session begins with an audience question – who thinks Britain is not going to leave the EU?

No one puts their hand up...

The message has finally got through, says Hammond.

Updated

Video stream: Philip Hammond at WEF

Former foreign office minister Mark Malloch-Brown reckons Theresa May’s cabinet is the “B team”.

Speaking on the same panel as Pascal Lamy, Malloch-Brown says:

“In the history of the Tory party, they have never been able to form a second cabinet if the first one falls under a bus.

If the first one (David Cameron’s) gets knocked out because it makes a mess of Brexit you get the B team.”

Updated

Lamy: Brexit is all a ruse

Pascal Lamy, the former EU trade commissioner and former director general of the World Trade Organisation, has an interesting theory about the government’s Brexit plan: it is all a ruse to disguise the fact that Britain is not going to leave the EU.

Speaking at a Clifford Chance breakfast in Davos, Lamy says:

“It is like world war two where the allies intoxicated the Germans into thinking the landings were going to take place in northern France when in fact they were going to take place in western France. That’s what’s happening here.”*

You have a fake foreign minister, then you have a message that Brexit means Brexit, then you choose the most costly option so that at some stage people realise that the costs are not worth it.”

* He’s referring to Operation Bodyguard, in which the Allies persuaded Germany that the Normandy landings were a diversion.

Lamy adds that while the lawyers are divided about whether the Article 50 process can be stopped once it has started, the process may drown in its own complexity. The divorce proceedings, he says, will be “long, obscure, bumpy and probably nasty”.

That’s why the idea that Theresa May is running a Black Cabinet operation of the sort mounted by Churchill in 1944 can’t be ruled out, Lamy argued.

Lamy’s comments come just hours after billionaire philanthropist George Soros caused a stir by claiming that Theresa May wouldn’t last long as PM, due to her divided cabinet and small Commons majority

Updated

The Agenda: Philip Hammond in the spotlight

Good morning from Davos, where the final day of the World Economic Forum is getting under way.

Today we’ll be hearing a lot more about Brexit, the global economy and Donald Trump, as the presidential inauguration reminds delegates that the world is changing – and not the way most would like.

The UK’s chancellor, Philip Hammond, is about to give us his views on Britain’s future relationship with the EU. Barclays CEO Jes Staley is also on the panel, at bank chiefs ponder whether to start moving jobs overseas. That session starts at 9.15am Davos time, or 8.15am GMT.

Hammond’s going to be busy too – he’s then appearing on a panel on the global economic outlook alongside IMF managing director Christine Lagarde, Japan’s central bank chief Haruhiko Kuroda, Wall Street titan Larry Fink and German finance minister Wolfgang Schäuble.

There’s a rather subdued feeling at WEF today; some business chiefs have left early so they can attend Trump’s swearing-in. Others are simply wondering what 2017 has in store for them....

Henry Kissinger will have some guidance; he’s giving his views on the state of the world at 4.30pm CET.

NHS chief executive Simon Stephens is also in town, appearing on a panel about hospitals of the future at 2pm CET.

Plus there are panels on science, security and the Middle East to keep an eye on too...

Updated

 

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