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The euro zone now has a budget — but no agreement on how to fund it



BRUSSELS, BELGIUM – MAY 24: French Minister of the Economy Bruno Le Maire (L) is talking with the Dutch Minister of Finance, Wopke Hoekstra (R) prior an Eurogroup Ministers meeting in the Europa, the European Union Council headquarter, on May 24, 2018 in Brussels, Belgium. 

Thierry Monasse | Getty Images News | Getty Images

Euro zone finance ministers have managed a few more steps in their quest for a common budget, but have yet to decide how to fund it and by how much.

In 2017, a wide-ranging and pro-EU speech from French President Emmanuel Macron argued that the euro zone needed its own budget. The idea was to have a pool of money worth several percentage points of euro zone’s growth available to help countries to weather economic shocks.

Since then, the euro area has seen an intense battle of words between two main camps: One led by France supportive of a common budget with direct contributions from member states, and a second , led by the Netherlands who have strong doubts on giving money to other nations without really knowing for what purpose.

What has been the compromise?

The 19 finance ministers agreed, after a marathon meeting that ran into the early hours of Friday morning last week, that the euro zone should have its own budget to help with structural reforms and public investment.

European Commission Vice President Valdis Dombrovskis told CNBC in Luxembourg: “It has been a long night, and indeed we made progress on several important euro zone reforms.”

One economist described the decision on the euro area budget as an “important step into the right direction.” “The euro zone budget is historic as five years ago no one would ever have thought of such a thing. True, it’s only symbolic, only a small foot in the door. However, it could become an important instrument in the future,” Carsten Brzeski, chief economist at ING, told CNBC via email.

Why does this matter?

This is another step in wider efforts to bring the different euro zone economies together, making the entire region more resilient against financial shocks. This is often a criticism and is seen as a disadvantage for those countries that share the single currency who have the same monetary policy but different fiscal realities.

Ricardo Garcia, a euro zone economist at UBS, told CNBC: “The euro zone budget is being structured in quite a growth supportive manner as any grants are linked to reforms or infrastructure projects, which makes sense from a European perspective.”

“The co-financing element further ensures alignment of interest and mitigates the risk of misallocation of funds,” he added.

At some point in time, Germany and the Hanseatic league will have to make up their minds: Do they opt for looser fiscal policies … or a bigger euro zone budget to keep the stability rules alive, or looser monetary policies.

Carsten Brzeski

Chief economist at ING

But what about the funding?

This is likely to be resolved only at a later date. There is disagreement over whether the funding should come entirely from the wider EU budget – the pool of money that all the 28 member states of the EU contribute to. This would prevent euro zone countries from having to put aside much more money than what they already do.

However, the EU has yet to negotiate its own budget for the next seven-year period. Other countries believe there should be additional contributions from the euro zone countries to boost the euro area’s budget.

The EU budget is a combination of contributions from all 28 countries and is used to help with a range of activities across them, such as infrastructure projects, development of rural area, border protection and promotion of human rights. On the other hand, a euro area budget is only meant to be used by the 19 members that share the euro and only with the purpose of supporting structural reforms and public investment.

“The aim is to make the euro zone budget part of the EU budget. The EU budget in turn will depend on what happens with Brexit in October and more importantly, on the result of the German coalition review this year. Therefore again, this is the best we could hope for at this stage,” Garcia said.

This suggests that it will take some time until the European Union approves its next spending plan. Only once that’s achieved, will the euro zone will be able to finish the details for its own budget.

“At some point in time, Germany and the Hanseatic league (a smaller group within the euro zone who are stricter on fiscal prudence) will have to make up their minds: Do they opt for looser fiscal policies — either more flexible rules of the Stability Pact (which determines countries should not have a deficit higher than 3 of growth and public debt above 60% of growth) or a bigger euro zone budget to keep the stability rules alive – or looser monetary policies, ” Brzeski said.

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Morgan Stanley says iPhone-maker Apple’s stock is ‘under owned’



Apple CEO Tim Cook arrives for Apples “The Morning Show” global premiere at Lincoln Center- David Geffen Hall on October 28, 2019 in New York.

Angela Weiss | AFP | Getty Images

Shares of Apple are currently “under owned” by even the Cupertino-based tech giant’s top investors, according to one Morgan Stanley analyst.

“Even the top 100 … holders of Apple (stock) have a position that’s less than the S&P 500 weighting,” Katy Huberty, managing director and head of North American hardware tech research at Morgan Stanley, told CNBC at the Morgan Stanley APAC Summit on Wednesday.

Morgan Stanley has a current price target of $296 per share for Apple’s stock — which ended Tuesday’s session at $266.29 stateside. The firm’s target represents a more than 11% jump in price from current levels.

“We still think the stock has room to run,” Huberty said, citing recovering iPhone demand, inflecting services growth and Apple’s quarterly share buybacks as possible catalysts for the share price.

Potential US-China trade war impact

Commenting on the potential impact of the ongoing U.S.-China trade war for Apple’s outlook, Huberty said: “What’s interesting is the company’s margins have been flat to up since tariffs went into effect … in September.”

“In the December quarter, again, gross margin guidance was better than expected,” she said, adding that Apple likely has “done a lot of work with suppliers” to shift production of some of its products away from China if trade tensions between Beijing and Washington continue to escalate.

Apple is one of the companies especially vulnerable to the ongoing U.S.-China trade war, which has raged on for more than a year and seen tariffs being slapped on billions of dollars worth of goods from both Beijing and Washington. With assembly of its iPhones mainly done in mainland China, any new tariffs announced could impact the price of Apple’s products.

For his part, Apple CEO Tim Cook said in June this year that the Chinese “have not targeted” the tech giant. Cook has also cultivated a relationship with U.S. President Donald Trump and his family as Apple seeks an exemption from tariffs that have been placed by Washington on imports from China.

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Trade war may give China a head start in race for Middle East, Africa



Ben Harburg, Managing Partner of MSA Capital and Rafik Nayed, Group Chief Executive Officer of Al Salam Bank Bahrain speak with Geoff Cutmore, anchor of CNBC on Day 3 of CNBC East Tech West at LN Garden Hotel Nansha Guangzhou on November 20, 2019 in Nansha, Guangzhou, China.

Zhong Zhi | Getty Images

The ongoing U.S.-China trade war may be prematurely pushing the world’s second largest economy toward greater self-sufficiency, but that could prove a win for the country as it seeks to make inroads into some of the world’s biggest untapped markets.

Ben Harburg, managing partner of Beijing-based venture capital firm MSA Capital, told CNBC the “decoupling” of China from its largest trade partner has forced Chinese businesses to innovate and diversify beyond their preferred timeline. However, he added that that has also served to accelerate their already planned push into the Middle East and Africa.

“This forced self-sufficiency and forced decoupling has yielded them a really attractive market,” Harburg said of Chinese companies — most notably those in tech — at CNBC’s East Tech West conference in the Nansha district of Guangzhou, China.

“The chip industry here would have loved another five years to get its feet underneath it. Operating systems locally would have preferred more time for maturation,” he continued during a panel hosted by CNBC’s Geoff Cutmore entitled “Beyond One Belt, One Road.”

“But it’s kind of the necessity of innovation at this moment to survive. It’s pushing these companies to emerging technology markets and what they’re finding there are incredibly attractive conditions.”

Harburg highlighted particular opportunities in the e-commerce and banking sectors, within which many of the regions’ markets have a penetration rate of less than 10%.

“China (has) an e-commerce penetration rate of around 30%. In the Middle East today it’s 2%,” said Harburg. “(It’s) hugely attractive to walk millions of people online and find them a place in e-commerce that’s obviously mobile-first.

Ben Harburg, Managing Partner of MSA Capital speaks with Rafik Nayed, Group Chief Executive Officer of Al Salam Bank Bahrain and Geoff Cutmore, anchor of CNBC on Day 3 of CNBC East Tech West at LN Garden Hotel Nansha Guangzhou on November 20, 2019 in Nansha, Guangzhou, China.

Zhong Zhi | Getty Images

Rafik Nayed, CEO of Bahrain’s Al Salam Bank and fellow panelist, seconded Harburg’s remarks, noting that Chinese companies have been attracted to the region by “organic” market opportunities and “shared geopolitical structures” which unite the regions.

“Chinese technology is genuinely interested in opening up new markets of half a billion people, $1.5 trillion economy in the region,” said Nayed.

However, he noted that recent shifts in U.S. policy toward the Middle East have created a “vacuum” that has enabled China to curry favor in the region and demonstrate its business capabilities.

“In that pivot, we’ve discovered that on the tech side it’s actually a lot more advanced than what we were used to in the West,” he said.

To leverage off those opportunities, Nayed revealed at the conference that Al Salam Bank has partnered with MSA Capital to establish a $50 million fund to assist with the Middle East expansion of Chinese companies, as well as to help create new regional businesses based on “proven Chinese business models.”

When asked by Cutmore about possible security concerns surrounding Chinese technology companies’ entrance into the region, Nayed said: “I have not felt there is a lack of trust in China tech … I’m not feeling it.”

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Can A.I. ever replace human doctors? Health tech experts weigh in



From detection to diagnosis, digitization is widely being accepted as the new approach to medicine.

Health care practitioners and patients are quickly embracing digital apps and advanced technology to get to the bottom of an ailment.

But can technology and artificial intelligence ever replace doctors?

“I don’t think at this stage, we are 100%, or even close to 100%, sure that AI can replace a historical high-touch type of doctor-patient relationship,” said Dr. Chun Yuan Chiang, a health practitioner and founder of IHDPay Group, a health care payments firm.

“In terms of diagnostic aid, it’s a different category. So, I would say at the end of Day 4, the patient wants recovery,” he told CNBC’s Nancy Hungerford at a panel discussion at East Tech West conference in the Nansha district of Guangzhou, China on Tuesday.

Changing landscape

Still, experts say AI — defined broadly as machines programmed to mimic human intelligence in areas such as problem-solving and learned behavior — has reshaped the medical landscape.

“We used to use x-rays to detect lung cancer. The problem is you can only go to stage 3 or stage 4 with x-ray,” said another member of the panel Dai Ying, chief innovation officer for GE Healthcare in China.

“Now, with CT you can see all lung modules, and with AI can tell where it is and how big it is. It’s much more advanced than before,” he said referring to computed tomography scans used to detect medical conditions.

Diagnosis of ailments and diseases is being done remotely these days. Health care providers are connected via centralized systems that can monitor patients remotely. But can AI replace a doctor’s visit for those that are remote?

“We are building telemedicine in our apps today where you can consult a doctor from the convenience of your homes, not for emergency,” said Jai Verma, CEO and board member of insurance company Cigna DIFC, and global head of government solutions at Cigna International. “I think AI, internet of things, are going to change the way we deliver health care in the future.”

Verma also believes that along with AI, blockchain technology will make it easier for heath care companies, professionals and patients to share medical records, and that many insurance companies are already looking at integrating blockchain into their modern systems.

Blockchain, the technology behind cryptocurrencies like bitcoin, is a public ledger of every transaction that has taken place.

Fraud and costs

As health-care providers plough millions into AI-powered machines, blockchain and other expensive innovative technologies to improve the future of medicine, there are concerns that health care costs could go up.

Experts think otherwise.

“I think the technology is going to help us streamline the operations and reduce our operating costs,” said Verma, pointing out that most costs these days are associated with manual work. “AI would help you to make it automated, so the future systems are going to help reduce your costs.”

In China, one of the largest health care markets in the world, Dai said AI can play an important role in improving efficiency for the hospitals. “I don’t think AI is all the time adding to costs,” he said. “In most cases, it saves the costs.”

However, concerns about fraud and data privacy persist as medical records get exchanged electronically.

Verma, who works for insurer Cigna, noted that many people misuse health care identities. “We lost a lot of money on fraud with people using the (ID) card and accessing the care for someone else,” he said adding that dispersing of incorrect medicine is a big risk with digitization.

Chiang pointed out that efficiency can be brought about by preventing fraud or moral risks, and that his company is committed to safety and authentication. “We provide a platform that everybody can use … to make sure it’s the right doctor, real doctor, real pharmacists, real drug, real insured person etc.”

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