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UK Prime Minister Johnson avoids Luxembourg press conference on Brexit

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Xavier Bettel, Luxembourg’s prime minister, stands beside the empty podium of U.K. Prime Minister Boris Johnson following their Brexit meeting in Luxembourg, on Monday, Sept. 16, 2019. Johnson held his first face-to-face talks with European Commission President Jean-Claude Juncker over a working lunch of snails, salmon and cheese in Luxembourg.

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British Prime Minister Boris Johnson faced a barrage of protesters’ boos, and an exasperated message from his host, after an hour of talks with his Luxembourg counterpart in the normally quiet cobbled streets of this small European nation.

Johnson had hustled into a meeting with Xavier Bettel, the Luxembourg premier, following a nearby lunch with the European Commission’s outgoing president, Jean-Claude Juncker. On the menu at both occasions: Brexit, and the current UK government’s efforts to change elements of an existing withdrawal deal that its predecessor had agreed to almost a year ago.

The British leader subsequently left the prime minister’s residence Maison de Bourgogne in the centre of this small city-state in a hurry, ducking out of a press conference alongside his opposite number, Bettel. Moments later the latter did not hesitate to, as he put it, “mince his words.”

“It was important,” said Bettel, standing beside Johnson’s assigned but empty podium at a press conference prefaced by loud protests, to listen to British proposals “to avoid a no-deal Brexit.” But he insisted that he had seen “no concrete proposals for the moment on the table. And I won’t give an agreement to ideas.”

Away from the loud and rowdy crowd of anti-Johnson hecklers, the prime minister did provide a brief televised statement to the British media before he returned to London, and insisted both sides’ negotiators had already completed a lot of work.

Boris Johnson, U.K. prime minister, departs following a Brexit meeting with Luxembourg’s Prime Minister Xavier Bettel in Luxembourg, on Monday, Sept. 16, 2019.

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But he acknowledged the only obvious area of common ground to emerge from his first face-to-face meetings with Juncker and Europe’s chief Brexit negotiator Michel Barnier, was that talks should continue, more extensively and more frequently.

“Papers have been shared, but we are now at the stage where we really have to start accelerating the work,” he said, “and that was the agreement today.”

“I can see the shape of it, everybody can see roughly what could be done, but it will require movement.”

EU waits on UK proposal

Both critics and allies have described Monday’s meetings as political theater, and Johnson once more in Luxembourg reiterated that if a fresh agreement cannot be reached by late October, then his government would ensure the UK can exit the EU “on the 31st of October, deal or no deal.”

The encounter with Juncker was scheduled exactly one week after the Parliament in Westminster passed into law a measure designed to block the possibility of an abrupt and economically disruptive departure on October 31. 

And after their lunchtime sit-down at a local restaurant, Juncker and Johnson emerged to boos from protesters and were forced to negotiate a scrum of reporters and photographers.

Within minutes, the European Commission issued a press release which said the head of the EU’s executive branch had reminded the UK prime minister that it was now up to the British government to “come forward with legally operational solutions that are compatible with the Withdrawal Agreement.”

“President Juncker underlined the Commission’s continued willingness and openness to examine whether such proposals meet the objectives of the backstop. Such proposals have not yet been made,” it added, in a point soon echoed by Bettel.

Sterling weakened sharply to $1.24 after Johnson failed to appear at the press conference, after having trended downwards during much of the day’s trading.

The currency had enjoyed a strong rally against the U.S. dollar last week, since the passage of parliamentary legislation last Monday that was designed to rule out a no-deal exit in October.

Political allies of the prime minister continued to indicate over the weekend that Johnson may try to circumvent that new legislation, and might defy a parliamentary majority that wants him to request a Brexit deadline extension if he is unable to win significant concessions from Brussels in the coming weeks.

As a consequence the ostensible reason for Monday’s working lunch with Juncker had prompted some skepticism.

“He clocks up the miles/meetings and can argue he tried,” said Robert Hayward, a legislator belonging to Johnson’s Conservative Party, of the Luxembourg trip. In a message to CNBC, Hayward said that the Luxembourg trip will allow the prime minister to later argue, “it’s not his fault” if a new deal is not reached.

Anand Menon, a director at the think tank The U.K. in a Changing Europe, also posited it was about “giving the impression of having tried once he’s failed,” as Johnson seeks to change key clauses in the existing Withdrawal Agreement that three times failed to win parliamentary approval back in London.

Solving the backstop

The chief obstacle remains the complex question of how goods and services will be traded between the British nation of Northern Ireland and the separate Republic of Ireland. The border between the two countries could soon become the U.K.’s only post-Brexit land frontier with Europe, but one that must remain open under the terms of a 1998 peace deal signed by the British and Irish governments and known as the Good Friday Agreement.

Since then, Johnson and some of his senior government ministers have begun to outline how they hoped to solve the nine-month negotiating deadlock between the U.K. and the EU, by suggesting that European regulations might apply differently in Northern Ireland and the rest of the U.K.

This was an option that Theresa May repeatedly and categorically rejected last year, during a period when her government held on to its parliamentary majority thanks to support from a small political party in Northern Ireland (the Democratic Unionist Party or DUP) that remains adamantly opposed to any new divergence between the territory and the rest of the U.K.

The U.K.’s Brexit Secretary Stephen Barclay addressed the matter in an interview with Sky News over the weekend, when he said it was important that the U.K. “leave as a whole,” but mentioned there was already in place the potential for some divergence between Northern Ireland and the rest of the U.K. “We can get into those details as part of the talks,” he added.

The DUP no longer provides the Conservative-led government with that key parliamentary majority, after Conservative lawmakers defected or were stripped of their party affiliation for opposing the government’s position during recent legislative tussles.

Bim Afolami, a loyal Conservative lawmaker in Westminster’s lower chamber, the House of Commons, acknowledged ahead of the meetings that the prime minister might not be hoping to achieve a “huge amount” in Luxembourg. He instead echoed a common view that Johnson and his cabinet are “betting the house on getting something sorted at the European Council” in mid-October.

The Conservative Party Chairman James Cleverly, writing in the British newspaper The Sun, acknowledged it as a “crucial EU summit” where Johnson would “strive to get an agreement in the national interest.”

The almost bi-monthly council summits in Brussels have often served as political pressure-cookers, with late-night, caffeine-fueled deal-making between EU leaders on issues including the European debt crisis, Greece’s bailout or Brexit deadline extensions.

Barclay joined his boss in Luxembourg, as did his opposite number at the European Commission, Barnier, who told members of the European Parliament last week that his team had not yet received any backstop alternatives “in writing that are legally operational.”

He had told a group of senior lawmakers he was unable to say “objectively” if talks with Johnson’s government had so far indicated whether or not a new agreement might be reached before the October summit. But he nonetheless played down the possibility last week: “We don’t have any reasons to be optimistic.”

Bettel: ‘This is a nightmare’

And Bettel, the Luxembourg prime minister, said Monday he was not prepared to offer a further Brexit delay unless “it serves a purpose.”

And in response to a question about the possible extension of a separate transition period after Brexit, during which the UK’s trading relationship with the EU would remain unchanged while both sides continue negotiations over the future status of the Irish border, Bettel was blunt.

“This is a nightmare,” he told CNBC. “We should stop to think whether people would like to have a longer period of transition. People would love to have clarity, what is going to happen in London and what is going to happen in the EU, and what will be their position.”

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China’s Hubei reports 630 new cases, 96 additional deaths

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South Korean health officials spray disinfectant in front of the Daegu branch of the Shincheonji Church of Jesus in the southeastern city of Daegu on February 21, 2020.

Jung Yeon-je | AFP | Getty Images

This is a live blog. Please check back for updates.

All times below are in Beijing time.

7:55 am: Hubei reports 630 new cases

China’s Hubei province reported 630 new confirmed cases, and 96 additional deaths, as of Feb. 22. 

That brings the total number of confirmed cases in the province to 64,084, and the death toll to 2,346.

All times below are in Eastern time.

3:58 pm: Virus cases surge in South Korea

The number of coronavirus cases tripled in South Korea on Saturday, according to the Korea Centers for Disease Control and Prevention, with the number of confirmed cases in the country surging to 433 from 156 over a 24-hour period. The surge in cases adds to fears among health officials that the virus, which has spread to 28 countries, could turn into a global pandemic.

More than half of the cases in South Korea are connected to the Shincheonji Church of Jesus, and over a thousand members have reported potential symptoms of the virus. The area surrounding the Christian sect’s church in Daegu, a major city in South Korea, has become empty as businesses there shutter.

12:20 pm: WHO fears spread of virus to countries in Africa

World Health Organization (WHO) Director General Tedros Adhanom Ghebreyesus met with African officials from Geneva on Saturday morning to urge them to prepare for a potential spread of the coronavirus across Africa.

Just one case has been confirmed on the continent, but health officials fear the increasing global spread of the virus, especially to countries with less developed health-care systems.

WHO says it has shipped more than 30,000 sets of personal protective equipment to six countries in Africa, and is set to ship 60,000 more sets to 19 countries in upcoming weeks. It has also provided online training courses to 11,000 African health workers, as well as advice to countries on how to conduct screening, testing and treatment.

Read CNBC’s coverage from the U.S. overnight: IMF lowers global growth forecast, as cases surge in South Korea

— CNBC’s Emma Newburger contributed to this report.

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IMF lowers global growth forecast

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Workers assemble cars at the factory of Chang’an Automobile in Dingzhou, north China’s Hebei Province, Feb. 16, 2020.

Xinhua News Agency

This is a live blog. Please check back for updates.

All times below are in U.S. Eastern time.

China’s National Health Commission said 2,345 people have died in the country from the coronavirus, and over 76,288 people are infected.

7:00 am: IMF says virus outbreak will slow global growth

The International Monetary Fund (IMF) said on Saturday that the virus will likely cut off 0.1% from global growth, and drag down growth for China’s economy to 5.6%, which is 0.4% lower from its January outlook.

“But we are also looking at more dire scenarios where the spread of the virus continues for longer and more globally, and the growth consequences are more protracted,” said International Monetary Fund Managing Director Kristalina Georgieva at the G20 Finance Ministers and Central Bank Governors Meeting.

6:30 am: Iran reports fifth death among 10 new confirmed cases

Iranian health authorities said on Saturday that five people are now dead out of the 28 infected with the virus, which may have reached most of Iran’s major cities, including Tehran.

The fifth death was among the 10 new confirmed cases of the virus in Iran. The reported cases there suggest that the virus is being transmitted much farther than previously known or acknowledged. Health Ministry spokesman Kianoush Jahanpour, who made the announcement on state television, did not say when the fifth person died.

The rise in virus cases outside of China is threatening to turn the outbreak into a global pandemic, with more countries starting to shut down travel across borders.

2:46 am: China transportation sector to resume operations by late February or early March

China’s transportation sector is expected to start up operations again in late February or early March, a Ministry of Transport official told reporters on Saturday. Delivery service companies China Post, SF Express and jd.com have all resumed operations. The services are in high demand during the outbreak as people would prefer to order food and supplies online or have them delivered.

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Investors need to face the warning signs in the global economy

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Global investors are being overly complacent about downside economic risks, aggravated but not limited to the growing impact of coronavirus.

They are underestimating the forces that are changing the very nature of the world economy – a growing degree of “deglobalization” in the face of U.S.-Chinese decoupling. At the same time, they are overestimating the power of monetary and fiscal stimulus to keep the global economic party going.

When G-20 finance ministers meet this weekend in Riyadh, they’ll do so at a time when all of the world’s ten major economies are slowing – and several confront recession. Next week, Beijing is likely to announce a delay in the meeting of its National People’s Congress due to the coronavirus outbreak.

This week, Apple raised fears of more global corporate troubles to come with a coronavirus-caused revenue warning. The full ripple effects of the virus, and of the economic impact of humans scared to be with other humans, will show up in first quarter results, in particular in tourism, travel and on all Chinese and global companies that depend on Chinese supply chains and markets.

Despite all that, investor complacency persists in no small part due to a fundamental misunderstanding of how rapidly the world has changed, economically and politically. We are only in the opening pages of this new era of major power competition and technological change, and there’s no model to “price in” its impact.

Within democracies, the public’s faith has been shaken in capitalism and globalization to produce results that deliver greater prosperity. Most recently, that has driven everything from the recent Irish election victory of Sinn Fein, to the UK’s departure from the European Union, to the erosion of the German political center.

Markets are wagering that the combination of fiscal and monetary measures will again prevent the worst. However, what if they’re wrong?

Most dramatic is the growing possibility that U.S. presidential elections this year could produce a showdown between two populists of different stripes but similar decibels, Donald Trump and Bernie Sanders. Both are septuagenarian insurgents who appeal to hard-core, unconventional constituencies, and that’s prompted global concern that the new U.S. normal may be abnormal.

All of that is unfolding against a backdrop of a major power test that at its heart is a systemic struggle between democratic and authoritarian capitalist models. Though traditional security analysts continue to worry about how U.S.-Chinese, U.S.-Russian or U.S.-Iranian tensions could unravel into armed conflict, the more likely outcome is a resource-sapping, continual competition that stops short of kinetics but involves information warfare, cyber assaults, and economic clashes ranging from trade wars to targeted sanctions.

But let’s get back to investors and their complacency, which is as easy to explain as it is increasingly hard to justify.

Every time the global economy approached the brink in the decade since the Great Financial Crisis of 2008-2009, some intervening force pulled us back. The latest came last year when it looked as though the global economy might slow to below 2 percent GDP growth, generally considered a way to measure the onset of a global recession.

Central banks stepped up. As the International Monetary Fund has pointed out, 49 central banks cut interest rates 71 times last year. The result was a 0.5 percent global GDP boost, according to the IMF. Monetary policy saved the day.

Investors understand that coronavirus could be a major 2020 shock, but they are wagering again that something will prevent this from becoming an economic disaster. They realize the U.S. Fed and other central banks may have fewer monetary tools to deploy, so they are counting on increased fiscal stimulus from governments.

For example, Chinese lenders on Thursday cut their one-year loan prime rate, which is used across the financial system, by 0.1 percent to 4.05 percent. The result was a rallying of Chinese stocks that day of 2.2 percent of the benchmark CSI 300 index.

That followed the Chinese central bank’s cut to its medium-term lending rate this week, as well as dozens of other measures Beijing has introduced in recent days to support businesses hit by the epidemic. The Financial Times reports that China’s central bank thus far has made 300 billion RmB available to large lenders and local banks in hard-hit areas, particularly Hubei province.

Wishful thinking

Even so, the S&P Global Ratings forecast that China’s 2020 growth could fall to 4.4 percent from its 6 percent level last year, if the coronavirus hit continues through April. Most predictions of that sort probably err on the optimistic side, and it may be wishful thinking that China’s economy will make up most of what is being lost once coronavirus recedes.

At the same time, the eurozone economy barely grew in the fourth quarter of 2019, up only 0.1 percent from the previous quarter, the slowest rate since 2013. Germany had zero growth. Real GDP in the eurozone was up just 0.9 percent in 2019, the slowest rate since 2013. (With the UK now leaving the EU, its leaders failed to agree on their budget on Friday due to insoluble differences.)

Governments across the world see these storm clouds, and a Bloomberg survey of economic forecasts shows that budgets are loosening in more than half of the world’s 20 biggest economies, providing some of the fiscal stimulus that central bankers have been seeking from their government counterparts.

Markets are wagering that the combination of fiscal and monetary measures will again prevent the worst.

However, what if they’re wrong?

Other than the United States, major central banks are tapped out, some of them experimenting with negative interest rates. Some experts argue that our low interest rate environment allows greater borrowing for fiscal stimulus.

That’s risky business.

Near the end

Global debt is nearing $244 trillion, the highest level on record, and that’s not a good record to be breaking. Public debt is the highest in advanced economies since WWII. In a recent Atlantic Council report, Global Risks 2035 Update, author Mathew Burrows explores a worst-case scenario he calls “Descent into Chaos.” It starts with growing indebtedness hitting China first and then spreading to the Western world, triggering a worldwide economic meltdown.

Burrows isn’t in the business of predicting the timing of global downturns. Yet it would be unwise to take one’s eye off this ballooning debt at this moment of uncertainty.

Investors are counting on the playbook of the last decade to hold out for a little longer.

That’s a risky bet in this year of coronavirus, slowing growth, growing debt, and rising geopolitical uncertainty. We’re near the end of a bull run that’s in year ten of a seven-year cycle.

Frederick Kempe is a best-selling author, prize-winning journalist and president & CEO of the Atlantic Council, one of the United States’ most influential think tanks on global affairs. He worked at The Wall Street Journal for more than 25 years as a foreign correspondent, assistant managing editor and as the longest-serving editor of the paper’s European edition. His latest book – “Berlin 1961: Kennedy, Khrushchev, and the Most Dangerous Place on Earth” – was a New York Times best-seller and has been published in more than a dozen languages. Follow him on Twitter @FredKempe and subscribe here to Inflection Points, his look each Saturday at the past week’s top stories and trends.

For more insight from CNBC contributors, follow @CNBCopinion on Twitter.



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