Transcripts For BLOOMBERG The Pulse 20150526

Revise Financial Aid today. It comes after they will not be able to make their payment by june 5. Yanis varoufakis has blamed creditors demand for more austerity for the lack of progress. Saying their guard government will not accept a cure. In a moment we go live to our international correspondent. Lets get the latest in athens. What is the state of bailout talks . It is another groundhog day in the greek crisis saga. The socalled brasses group have resumed talks today. The significant differences remain in areas including sales overhaul, labor market reform, and targets as the greek spokesman explained yesterday. The impasse continues for the fifth month. There are only five weeks left of the bailout. It reminds viewers at the end of next month, they extension that greece got in february for its bailout expires. After this, they will have no financing whatsoever. In this. , greece could strike a deal with creditors, have this deal approved by parliament and then lay the fine foundations for the new financing agreement which will succeed the current bailout. It is a lot of work to do and there is not much time. Francine nikos, bottom line, can greece haiti imf . In theory they can. As far as they know they have reserves. Several Government Party lawmakers including cabinet ministers have said that greece should not pay the imf. They shouldnt use depleting reserves on imf payment. It should use the payment and then the next payments on june 12, 16th and 19th two raise to predators. First of all, you dont want to mess with any second and most important, great banks use guarantees from the government. As collateral for emergency lifeline extended by the use ecb. If the greek state misses a debt payment, then the Central Bank Governors may conclude that these guarantees that great banks pledged are no longer reliable. That would mean severe severing the lifeline. That would force the greek state to impose a Long Bank Holiday followed by a draconian controls. It is a big price to pay. Great government spokesman said yesterday that greece will continue servicing its debts for as long as it can. We have no reason to doubt that. Francine thank you. Hans, with the latest from the german finance minister . Hans we heard from them over the weekend, he laid the problem squarely at the feet of the greeks. He said it was up to them to compromise. When you look at the statements they have been saying the same things in separate 20th, from the german side greece must implement the program may have a plan agree to. From the greek side, they simply wont do more austerity. If you think there is austerity in the program, by my reading there is, eventually they will come to head and the conflict will be out in the open and they will have a public rupture. Francine what do you make of the spanish elections . Were hearing from the Prime Minister today plot trying to explain his parties election results. Is it mayhem . Hans spain and greece are different. Syriza has a thin majority in greece, 12 feet majority and 300 seat parliament. In spain, you sell the popular ruling party go down to 27 . These were local elections. If these trends hold, at least in spain, the twoparty system could be in peril. You could have a four party system and have challenging prohibition talks. It is unclear who they want to govern. They would clearly be in the minority. The big difference is yes, but amos is gathering steam, they are nowhere at the level three does is that. Francine thank you so much. That brings us to a twitter question. Speculation about when the fed will raise rates for it where asking, will be euro slide back . You can tweet us. You can see their the pulse. We are joined by pimcos credit analyst. Inc. You so much for joining us. Can you give us a sense of what your take on greece is . There seems to be market fatigue. Are we going to have a default or not . Grexit negotiations are coming for a time. As we said, cash is running out at the end of the month. It is possible is enough cash for june 5. Either greece has to back down and agree to what europe once or stick with redline. I think ultimately a deal will be found. Both sides will probably compromise in advance of the imf payment. Partial disbursement, or increase in tbills would be possible. I think a default will be avoided, i cannot deny that it is possible a default will happen. In that case, the situation will precipitate with some capital control environment. The ecb increases haircuts on the bonds that greek greece uses as collateral. Essentially that would lead to instability. Francine what does it mean for your portfolio strategy . It is a situation of either negotiating tactics to the wire or not. As an investor who how you prepare for both . We are prepared as i said, the outcome will be benign. In a near time it will lead to weakening of the euro. I would look to this volatility ultimately. It is a story of growth of one and a half percent. Rick assets risk assets are still attractive. Francine you say that you are expecting the outcome to be benign. What are the chances of a possible default for example on international predators and not private . Is this a scenario that you have meddled . It is possible. The consequences of that are not massive. The main consequence would be a possible acceleration of the loans in response to imf control. They would probably not do that at that stage. The main consequence would be the ecb tightening up liquidity and leading greece to a capital control situation. With that lead to grexit or not . It could. I dont think it necessarily needs to. Under the pressure of capital controls by the government it is likely the government will turn around and find a deal. Francine from what we have seen in denmark, youre saying there are some deals because the eurozone is going up. Is there still an order and bonds . Why has the selloff happened . Markets were positioned one way. Everyone was on the qqq trade. Q e trade. Market makers are not helping investors who want to trade. Is it over . Probably not far from over. Fundamentals could justify a somewhat higher bond yield. Even when you take into account the pimco view, low Interest Rates. Lets not forget the power of qe. We have the central bank with 60 billion of assets of month. Essentially, bonds are being drained from the market. The selloff is probably not far from over. Francine as terms in terms of eurozone growth, your exciting growth to be sustained . When you look at the reality with such a weak euro and low oil prices, is this just a little bit of a blip or do you think the trend is towards slow growth . We should not get overexcited. 1. 5 growth is not extremely exciting. It is sustainable. Trend growth in the eurozone is probably 1. 2 . I think we can have it for a while. We have had such a depression for so long. We had ecb qe coming to an end. As you said we have oil prices the weaker euro which will probably be sustained thanks to the qe. I think we can grow at this pace for a good couple of years. Maybe three years if no shocks. Francine no big shots. Shocks. Here is a look at what else is on a radar. Ryanair year earnings of jumped 66 . Profit jumps. Ryanair has been working on a softer approach to Customer Service. A former trader has arrived at the crown court in london where he is set to become the first person to face trial for alleged liber rigging. He is accused of eight counts of perjury to manipulate liber. We will be live at the court later in the show. Charter communications is near an agreement to buy Time Warner Cable for about 55 million in cash and stock. That is according to people familiar with the matter. Charter pay about 195 a share. Chinese stocks have surged to the highest level since 2008 on optimism over the government plan to use foreign access in its market. The shanghai composite is up. We will be taking you to the crown court in london as the first person to face trial for allegedly libor rigging makes an appearance. Were joined by a member of the greek party and her take on a possible consequences of a grexit. And then a new report on the age of billionaire Wealth Creation is set to level off. How David Cameron is said to be trying to win over european leaders. More on that next. Francine welcome back to the polls. The u. K. Prime minister, David Cameron is spending this week trying to secure reforms ahead of the referendum on britains membership of the eu. Mr. Cameron has said the european president at the residence. Lets get more on this. What does this signal in terms of timing . To me this signals that he is trying to find a way to move the referendum forward. At the moment it is promised to take place by the end of 2017. Obviously with David Cameron they are keen to move that forward to possibly next year. Francine what are the obstacles . The problem is he needs to get agreement from all the other eu members on the reforms that he wants to achieve. This means he has to get an agreement from eastern europe. He has alienated a lot of the european governments because of his comments about migration and benefit terms of migrants to the u. K. He has to be on a serious Charm Offensive to undo some of the tensions that we saw before the elections. Francine in terms of reform and renegotiation, what do we think is possible . People are saying that treaty change will not happen. What we might see is some kind of protocol, im kind of deal that suggests we make a change in the future. Francine thank you so much. Were back with pimco analysts. In terms with how you play the u. K. And guild when looking at the referendum, this may be put forward, but it does not give them enough time to renegotiate. How do you put it on the bond market . Somehow the market has been expecting that. What does it mean for guilds . Uncertainty will not be good for the pound. It could lead to a fall in yield. Uncertainty could weaken the economy. The bank of england could be less prone to increase Interest Rates. I dont think the gilt market will necessarily trade on a referendum right now. More importantly, it is what the bank will actually do and how the cycle plays out. Francine are we expecting an Interest Rate rise in 2016 . I would say in the middle of 2016 is the earliest. We should have the fed hiking and a second half of the year. The bank of england will likely lad by six months at least. Couple of reasons why, currency has been strengthening. The currency has a bigger impact on the u. K. Than the u. S. Economy. The u. S. Has a larger economy. Secondly we has fiscal tightening coming up in the u. K. We have a deficit of 5 still. This is early in the electoral cycle. Governments want to frontload austerity so they do not ruin the Electoral Campaign later. The third reason is essentially inflation has been very low in the u. K. If you look at inflation it has been 0. 8 . It has been closer in the u. S. Francine how much do you look at productivity . This is one thing we have been trying to figure out without success. We have is productivity puzzle in the u. K. Is because of regulation on the Banking Services . Its not where it should be or is it something deeper that will have to be addressed in the coming term . The Banking Sector could be part of it. I dont think it is necessary the explanation. It is not just the u. K. , it is a global level problem. It is been particularly week in the u. K. , question here is of the week productivity is connected to the strength of the labor market. We have seen growth improving in the u. K. That is labor focused. We have had low wage inflation, for companies that has been worth more to higher more relative to using more capital. Some of it as a substitution of labor and capital. Francine thank you so much. Coming up, how ryanair and their softer approach to Customer Care seems to be paying off. Francine welcome back to the polls. Lets turn to airlines now. The budget carrier ryanair reported a 66 drop in earnings this morning. The company ceo spoke to bloomberg and he says the strategy to grow their Customer Base is working. I have to say first and foremost it is not about the business traveler. At the moment, depending on the various airport, 27 of our passengers our business. Not all of them are business plus, that is the challenge for us to convert 10 of our passengers to business class. Francine lets get more from our business reporter. There was a big jump, that was due to them being more friendly with customers. Kari they had just more than 90 million passengers. They were increasing capacity adding more planes in the winter season and filling of those planes. They load factors, their measure of how full the planes are jumped to 83 . They are doing a good job at selling those seats. It does see the things they have been doing have been working. All of the things feet into improving the image. Francine what is the outlook . Kari the focus is on ryanair and easyjet. There are optimistic. Theyre looking at 100 million passengers. Profits up again. A little bit under the one billion euro expectation. It is early in their Financial Year. Their Financial Year ends in march, it is still early and their cautious. Last year ryan air raised their guide five times. We could expect some tweaking as the year progresses. Francine what about aer lingus westmark kari we should be hearing something today on this deal. From what we understand, the Irish Government has gone to the eu to see what they would feel about a deal between i. T. The Parent Company buying aer lingus. Today the cabinet is discussing the deal. We shall see. 19 girl francine thank you very much. Were back in 2. [baseball crowd noise] [x1 chime] [crowd cheers] oh i cant believe it [cheering] hi, grandma francine welcome back to the pulse. Here are the top headlines. The u. K. Prime minister, David Cameron has met to discuss renegotiating the terms of the membership of the eu. It kicks off a weeklong to her and which cameron will meet other leaders. While he meets the danish Prime Minister on thursday. Polands president elect to just defeated the incumbent in the first round of the paul earlier this month but not by enough to declare victory. A second round of voting on sunday will ensure that he takes over as president to. Nigeria fuel negotiators are putting an end to shortages. Fuel suppliers held back because they said they were still owed money by the outgoing government. Dealmaking between u. S. Cable Companies Look set to continue. Charter communications is set to being closed to buying Time Warner Cable. Caroline hyde is here with the latest. What is the story . Caroline pretty phenomenal in terms of a price point, also in terms of a smaller Company Buying a much better fish. We have the price tag of 55 billion that is how much Charter Communications will be putting on Time Warner Cable. That is a nice premium. 100 95 per share. The bulk of that will come in cash, about 100. The rest will be made up in stock. Or is the option for shareholders to up the amount of cash to 115 per share and slightly less dock. The reason they want to pay out the premium first of all, scale is bigger. Charter communications is the biggest fourth biggest player. They would snap up the second biggest player. They would be quadrupling customers. They would be second to comcast. It is about scale, that gives the more leverage when negotiating contracts with television networks. Interesting action went on last week. We have patrick draw he of all teeth altice buying a sudden link, the Second Player in the u. S. He want to scale too. Altice saying they want half of all revenues coming from the United States. Half of their money to come from the u. S. They are chatting with time warner as well. Suddenly this lights a fire underneath the rival billionaire patrick to rocky one side and john malone on the other. Clearly he has been looking at what the price point helps them do. It helps him notably he would be funding the deal. He would be flexible with the money. John malone was fun to the deal to about 5 billion worth. Difficult for altice to get on top of that price. They have less financial flexibility. They feel that 14 premium is to not only gain scale, but also fight off the rival bid coming from john malone who has actually meant toward Patrick Drahi. You have a breakup fee of 2 billion. That is recognizing the antitrust concerns. Time warner cable has already been bid for this year. They were meant to have merged with comcast, but that deal was shut down because of regulatory concerns. How now does john malone and charter try to woo the regulators into thinking this is a good deal for the consumer. It seems from analysts altice plus time warner would be a better fit for regulatory concerns. As far as financial power, you have to hand it to john malone. Francine thank you very much. A former trader is in court this morning he is the first person to face libor reading. Ryan is in london. Brian, tell us about this trial. Ryan tom hayes arrived with his wife about an hour ago. His trial, the first really in the libor trials is set to begin in 15 minutes. That is when they will have jury selection. It has been a long time coming. Three years ago he was arrested three years ago the fraud squad in the uks looking into the alleged rigging of libor. He is facing a counts of the indictment, all of them alleging he conspired with colleagues in the Banking Industry to break or attempt to rig rates for the bank, and his own economic interests. He pleaded not guilty two years ago, ever since then he has been out on bail. Today he appeared here. It should go for 12 weeks area this is a big one. This is serious. If he is guilty, he could be looking at 10 years in prison. Francine the banks paid close to 4 billion 4 billion pounds in science. Now we are reminded of libor, where does this all face . Ryan the libor fines have been huge, 9 billion for it is not legacy. If you look at deutsche banks earnings about a month ago, they too were hit by libor fines. About half of what they had been in the past, mostly because the legal costs. It is a big issue in terms of the physical health of the banks. What we havent seen so much of his of course the criminal investigations, the trials. This is the first time we are seeing a traitor actually go to court and have a court case where there is alleged criminality. That has been something that has the regular realtors and prosecutors on trial if you will themselves in the court of public opinion, there was a real outcry. Money aside, the issue with libor is it was the watershed moment when there was an outcry in the public and people started to say, we need more scrutiny of the banks. Then we had the fx allegations of manipulation the probes into commodity markets. It started here. It was a long while ago. As you know, the Legal Process takes time. Again, it all kicks off in about 15 minutes. We get jury selection. If were lucky we may hear from tom hayes himself, at least to his lawyer with opening arguments. Possibly as early as today. Francine thank you so much. Meanwhile, the fight levied against banks for libor reading are already being put to use. They are helping to fund the London Air Ambulance service. Bloomberg takes a look at how libor fines are saving lives. The ambulance goes to the sickest trauma patients. Our philosophy is to bring the hospital to the patient. The intervention we provide our Time Critical to the patient. The air ambulance is able to get people around eight times faster than we can buy other response times. Where able to use a range of procedures including anesthesia and blood transfusions. There are two big surprises about air ambulances the first one is we are a charity. We are not supported by Central Government other than the libor fund. The bad behavior of Financial Services has been a catalyst for a good cause. There is only one emergency helicopter for this great city. That is simply not enough. 10 Million Pounds in the libor fund with a starting point. We raised money from individuals and other businesses in the city. We still need more money to help sustain that second aircraft for london. People need emergency anesthesia, and surgery, those extra minutes can be the difference between surviving and not survive. Francine coming up, we will be speaking to a member of the Greek Parliament Standing Committee on economic affairs. Stay with us that is coming up next. Francine welcome back to the pulse. We have seen planes grounded and banks closed, the problems came despite nigeria being one of the biggest suppliers of crude oil. First of all, tell us more about the dispute and the agreement. The agreement was struck late yesterday afternoon between the finance ministry and the fuel marketers. This is a this crisis has been building for weeks. Fuel shortages in nigeria have been growing. It essentially comes down to the subsidy. The government subsidizes gasoline or petrol and nigeria. With the clash in crude prices it is struggling to pay the difference between the price of crude oil and its regulated price. Because of its depletion of the revenues it is struggling to pay that. Francine give us an idea of the impact of the crisis. The cost of the economy. Paul is having a big cost. A lot of businesses have had to shut down some of their operations from mobile phone services. The biggest mobile provider said they were running out of diesel to generate mobile phones. Airlines have been shut down. There have been massive delays at airports and banks have also at least yesterday had to shut their doors early. It is having a big impact. Most analysts we speak to say they think stocks will get hit in the Second Quarter and numbers for banks and consumers stocks for nigeria will be week. Francine we mentioned nigeria is africas biggest oil producer. The Refining Capacity is inadequate, is this being addressed . Paul at the moment there are a lot of ideas in place. Africas richest man is planning to build a 650,000 a day oil refinery. He hopes that will come to fruition in 2018. Any shortterm, theres does not seem to be a quickfix to the lack of refining capacities. They are not operating anywhere near the levels they should. Nigeria will be importing the bulk of its Refined Petroleum for a long time. Francine thank you very much. Lets turn degrees now lets turn to greece now. The finance minister has blamed creditors for a lack of a deal. Joining us now for more from athens, anna. How worried are you are about the situation . Anna i am worried. We clearly need a deal. Greece is facing a credit crunch. The government is literally scraping the bottom of the barrel trying to find money to pay a pension and salary. That is in fact the only thing they are paying. Tax revenues are below target. They have legislated taking all of the cash reserves from pension funds, all of the government bodies. The real economy is literally at a standstill because of all of this. We certainly think a deal is not only crucial to the future, but it has to happen immediately. You have to realize, we are not getting official information. They have not informed parliament. They have not informed the political parties. We dont know what is on the table. We are here in contradictory statements. Internationally we are hearing there is a great distance on many open issues. The greek government is saying it is optimistic about striking a deal within the next few days but at the same time they are saying that they cant, or even worse that they will not make the imf payment. That is quite frightening because it takes us to uncharted waters. Francine we were warned before he came to power that the accidental default scenario of greece stumbling out of the euro was a possibility. He has ignored it for years, are we closer to that scenario . Have you modeled . How do you modeled that . I am concerned. Clearly the ball is in his court to decide what to do. My party is the party that actually put greece in europe in the first place. We are here to help support keeping greece in the eurozone. As you know as a result of the economic adjustment program, greece has suffered a lot. We have lost 25 of our gdp. We have a 26 unemployment rate. Over 90 of greece wants to stay in the eurozone. His preelection central promise is he would get a better deal and would keep us in the eurozone. He promised a host of other things. Increased pensions, salaries all sorts of other things which are now clear that will not happen. There are Political Forces in greece that will step up to the plate in order to support us remaining in the eurozone. I am not talking just about my party. Francine what are the chances that greece will default on institutions but not on private creditors . And are anna i dont know because of the confused rhetoric. The voices inside the ruling party are speaking about going back to the draft line. That is scary. We are a democracy, there are plenty of immigrant past they can lead to a turning point. I think we are also seeing any political system, we are seeing a good thing, the end of populism. That has been a great impediment to us Going Forward. We are going to have to make a decision here. Im confident that the greek people and Political Forces that are proeuropean will prevail. Francine are you concerned about a run on the banks . It seems difficult to tell anyone in greece to leave money in the bankss . Anna im concerned about everything. I am mostly concerned that we seal this deal as quickly as possible. We had to return to some sort of stable situation and a deal is crucial to that. We have to see a deal very, very soon. That is the imperative at the moment. That is why we are pushing them in that direction. We are here to help. There are other Democratic Forces that will help as well. Francine give us a sense of your most pressing concerns. Look at the polls and the approval rating, not from government but tactics to renegotiate with the eu seem to be dwindling. Do you think this government will last . Anna i think he was elected by selling hope. Hope that there was an easier way to achieve what greeks want and all of us want to see greece get out of this crisis and move on to a growth cycle. That is what he was elected on. I think people are still hoping that this deal will have something that is better for them and that is better for the country. As time goes by and we live in this environment of constructive ambiguity and they see what is happening to the real economy, people are losing hope. That is bad. As i said, populism has always been a huge obstacle to greece Going Forward and really making good on all of the potential that we had. We have a lot of young educated people. Greece is a good country. We can go forward. I think people will come around and will put your first and stay in the eurozone, which is what they want. I think we are a democracy, i think we will work this through. The shortterm outlook might be get worse than it was. In the longterm the damage that has been done over the past four months and he setbacks are manageable and reversible over the course of the next few months. I think we are getting to that turning point where we will see that happen. Francine thank you so much for joining us today. A member of greece is Standing Committee for greases economic affairs. Up next on the pulse, job creation is set to level off. Francine welcome back. A new report by ubs suggests that the rate at which billionaire entrepreneurs is set to level off. Bloomberg billionaires reporter joins us with the latest. How many billionaires have been selfmade and what is this mean for their future growth . Well over two thirds of billionaires are selfmade. It is over 70 . Compared to 20 years ago it was only 43 . It is almost doubled. Going forward it is a rapid rise. This report finds that it will not continue. Francine when you look at selfmade billionaires, compare a u. S. Billionaire to it and asian one. A u. S. Billionaire have often made their money quickly. In asia you see them grow their fortunes off of Industrial Industries like real estate or consumer band consumer demand. Francine thank you so much. Up next, the second hour of the pulse. Francine the standoff continues. Great aid talks greek aid talks. Charter communications nears a deal for Time Warner Cable. What it means for europe. Thomas pain becomes the first person to face trial over thomas payne becomes the first person to face trial overrate rigging. Welcome to the pulse. Live from london. Im francine lacqua. We have had that very Important News 15 minutes ago. This has to do with china. The imf saying that the chinese currency is no longer undervalued. They are urging china to make rapid progress on greater Foreign Exchange flexibility. This has been a very contentious point between u. S. Officials and chinese officials. They should now aim for a Floating Exchange rate within two to three years. They have gone toward that direction. The imf is working closely with china on the admission of the yuan on the ftr basket. We have been talking about china. For five years ago, there was clear acrimony between the secretary of state of the United States and the chinese government. China has come a long way. They have said they can definitely do a lot more. The economic transition means that Slower Growth is here. This is what the chinese premier was telling us at dabble us at davos. The labor market remains resilient despite the slowdown we saw in china. Watch out for that big news on china. Greek officials will try to revive their bid to access Financial Aid today. The interior minister warned that the country will not be able to make its imf payment on june 5. Meanwhile, the finance minister Yanis Varoufakis has blamed demands for more austerity for the lack of progress, saying our government cannot and will not accept a cure that has proven itself to be worse than the disease. Lets go straight to our international correspondent, hans nichols. Give us a sense of how these negotiations are viewed from berlin. Hans the view is very clear. This is up to greece. It is greece that needs to move. I have been canvassing news sites looking for little snippets of news. The only thing we have is negativity. We have an interview from the member of the ecb board, the estonian central banker, he says he does not even see a whole lot of progress and that both sides are quite far apart. Moments ago, we heard from the Central Bank Governor of italy and he is talking about how there are grave concerns for the rest of the euro because of the uncertainty in greece. You do have the finance minister saying that the ideal breaker is austerity and that is a massive dealbreaker. It does not seem that the germans are close to budging nor are the greeks. We have just had an official Say Something about the coming g7 summit. Greece will be discussed on the sideline and will not dominate talks. Lets go to athens francine lets go to athens. How are the bailout talks being described at home . There is a lot of restlessness within the governing party. Tsipras was addressing an audience of party members. There is a growing constituency within the party that advocates saying if it comes to a choice of wages and pensions, then we dont have the money if we dont have the money then we cannot pay the imf. On one level, it is just common sense. If the money does not exist, it cannot be paid. This is the stock line the government is giving. The interior minister one step further in an interview. This guy said that the money is not there therefore we cannot pay. The official line from the government is not going that far. It is saying that if there is not a deal soon, we dont want to find ourselves in a position where we cannot pay it. Francine what are the chances that greece defaults, but sticks to its repayments for private creditors . Marcus i would say those are quite high. The earliest principal redemption does not come until 2017. It is just a question of paying Interest Payments. A few weeks ago, we had hans hume saying this is a guy who knows a lot about greek debt the creditors really got walloped the imf is supersenior. Again, we are just talking about Interest Payments here. There is a long way to go before we get to a situation of defaulting on private creditors. Francine hans, we were looking at spain over the weekend. I know it is not exactly the same. There seems to be more of a wave of antiausterity feeling across europe. How do you read what is happening in spain . Hans in spain, the current governing party has a clear incentive not to has this idea have this idea that pushes for austerity can be rolled back by decisions. You saw the Popular Party in spain go from 38 in the last election down to 28 27 . That is a remarkable decrease. Put aodemas is far from getting a majority. The government has an incentive. We saw this in the february talks. Spain has more of an incentive at least as much as anyone else to hold the line that these countries should impose austerity. If greece gets a pass from austerity, some potential voters in spain may be thinking that we can get a similar pass in spain. Francine guys, thank you so much. That brings us to todays twitter question. Speculation about when the fed will raise rates. Will the euros slide back to parity with the u. S. Dollar . For more, we are joined by marco valli from milan. How worried are you that we are sliding to a greek exit . Or that there will be sumps some sort of negative event unplanned for . Marco i see Stronger Political willingness to keep greece in the eurozone. My view is that the european peers will remain quite stuck on the line. They are not going to make any concessions. It will have to be the greeks making the first move. Is that going to happen . Ultimately i believe so. If not, i believe the eurozone has sufficient firewalls in place to stand up. There will be a lot of volatility in the shortterm but ultimately, they have the tools to preserve the eurozone from meaningful contagion effect. Francine how do you model this . If this happens if we have some kind of default, are the markets going to go haywire . Or have we talked about it enough for us to be prepared for it . Marco i think that markets are kind of getting prepared for it. If we look at the spike in Interest Rates on the greek curve it is clear that there has been a high discounting of potentially negative outcomes. What the market is not discounting is actually grexit. I dont think it is fully priced in. It is impossible to model. This is unprecedented. European partners will try to show some flexibility, but it will have to be the greeks making the first move. I still believe this is going to happen. The greeks have the most to lose if the grexit materializes. The first step toward a neck it would be issuing ious. An exit would not happen overnight. The issuing of ious would be seen as the first step toward a grexit. I think markets will be sufficiently mature to understand what is happening in greece is the development of something of a political nature. It would be more damaging for the eurozone to try to keep greece at all costs. Markets will have to get adjusted to the fact that if the government is not compliant then the eurozone cannot be irreversible. Francine sorry. Lets go back a stec pick back a step. What do you think are the chances of a grexit . Marco no, no, no. It is below 50 . Ultimately, there is a lot of political willingness to keep them in. Although need to see is that greece shows the extra steps to meet the requests from their eurozone peers. I refer mainly to labor market potential reforms and to be able to generate a sufficiently high primary surplus to put the debt to gdp ratio on a downward trend. If the minimum conditions are not met, i dont think it would be in the interest of the eurozone to bail out greece at any cost. We should get ready for a neck set, but this is not my view. It is still below 50 . Francine marco, thank you so much. Marco valli, there. Here is a look at what else is on our radar. Ryanairs earnings jumped. Profit rose. It is 247 Million Euros higher than the previous year. Ryanair has been working on a softer approach to Customer Service to expand its base. A former trader will become the first person to face trial for allegedly rigging. Thomas hayes is accused of eight accounts to manipulate libel. We will be live at the court later in the hour. Charter communications is near an agreement to buy Time Warner Cable. That is according to people familiar with the matter. Charter will pay about 195 per share 14 above Time Warner Cables lows price on friday. Chinese stocks have soared to their highest levels in 2008 on optimism of the governments plans to boost foreign access to markets. Up next, a week of wooing. Why the u. K. Prime minister David Cameron is trying to win over u. K. Leaders. We will be back. Francine welcome to the pulse. Over the last half hour, we had some big news from the imf. The chinese currency is no longer undervalued amid the reserve currency bid. The imf dropped its longheld view that the yuan was undervalued and that is strengthening chinas bid to win reserve status for their currency. We will be covering face with our reporters on the ground. Here in the u. K. , the u. K. Prime minister, David Cameron, is spending this week trying to woo european leaders. It began last night. Mr. Cameron hosted the Jeanclaude Juncker for dinner. Lets get more on all of this. Great to have you on the program. Does this signal that the referendum will have to be held before 2017 . They are trying to hold it next year, possibly. Germany has already said that it would prefer this to be the case. Then it does not interfere with german elections and french president ial elections. David cameron would like it to be earlier rather than later because this is going to dominate his term until it is actually over. The problem is getting everyone around the table to agree. Francine that is why there are so many hurdles to pulling this referendum earlier. Svenja absolutely. You need to get the agreement with france and germany and many other European Countries that cameron slightly alienated with his remarks about migration before the election. Francine what can he renegotiate . Advancing the referenda may not give David Cameron enough time to renegotiate and it may not give him enough time to explain to the public why it is good to stay within the eu. What are the main hurdles to renegotiation . Svenja the momentum is behind him now. The polls suggest that people would vote to stay in. The status quo seems to be more acceptable than one would think. The problem really apart from getting everyone around the table to agree, is that he needs to get the skeptics and his party in his party to align. We know that treaty change is not going to happen. Francine yes, it certainly wont. But you could have some red lines. We know that Angela Merkel wants the u. K. To stay with the eu. It depends on how much he is willing to give in. Svenja the one big red line is freedom of movement. We may see some kind of protocol, some kind of deal which suggests that it could change in the future, paving the way for that. If you like, a spillage of reform and some willingness shown by other eu countries to give britain a fairer deal. Francine thank you so much for that. The very latest on this u. K. Referendum. Nigerian fuel marketers have agreed to continue supplying gasoline to end the worst shortage in decades. Major marketers were holding back supplies because they say they still were owed 1 billion by the outgoing government of Goodluck Jonathan. Great to have you on the program. Tell us more about the dispute and the agreement. Basically, the dispute was because the government paid a subsidy. [indiscernible] can you hear me . Francine we can. I know the line is sometimes bad. Tell us more about the agreement. [indiscernible] it was a basic subsidy to keep the price low compared to international prices. There is a dispute about how much exactly this is worth. The retailers of the outgoing government presented [indiscernible] [indiscernible] they went on strike. They stopped distributing they want to the outgoing government of Goodluck Jonathan to pay them. Yesterday, lawmakers called the finance minister and about the companies together and they reached some agreement. They agreed that they will start distributing. Francine what has been the impact of the crisis on the economy . Dulue huge. The biggest bank [indiscernible] nigerias airline virtually grounded all domestic flights. The Telephone Company [indiscernible] the cost has been quite huge. For individuals, as well as for companies. It is quite huge. [indiscernible] francine all right. Thank you so much. The wave of dealmaking between u. S. Cable Companies Looks to continues. Charter communications is set to be close to an agreement to buy Time Warner Cable. Caroline hyde is here with the latest. What is the story . Caroline the story is the number four Company Buying up one much larger than it. Charter communications is looking to offer 55 billion to Time Warner Cable the number two player in the United States. This could come as soon as today. 195 per share. That is a 14 premium. You are getting part of that in cash. It would be 100 in cash and the rest in stocks. There is the option to up the cash portion two 115, drawing back some of the stock option. This is about scale, size, this is about Charter Communications leapfrogging and becoming the number two player in the u. S. They would have some 17 million subscribers. This is about gaining leverage when you are getting into that negotiation with tv networks when you are trying to buy that content. This is what they want scale for. They want to take on amazon netflix, an industry that is being disrupted. It is not just about scale. It is also about competition. Competition of billionaire versus billionaire. Charter communications is held by john malone as the number one biggest shareholder. It is patrick drawahi, someone who used to work for him who is now coming in and spicing things up with altice. That is who Patrick Drahi owns. Altice brought up the number seven player. Drahi was having discussions with Time Warner Cable, too. Suddenly, Charter Communications has to get its act together and show scale and strength and that is why they are putting up the premium to be able to blow altice out of the water. They are coming up with their second bid. They tried to buy Time Warner Cable in 2014, but the deal was not good enough and suddenly comcast and Time Warner Cable, that merger was on the card. That unraveled due to regulatory concerns. Charter communication is not only looking to team with Time Warner Cable, they are looking to do a deal with brighthouse. So much activity going on in this space. If we look at what the deal does offer up in terms of a price point, we can look at the numbers in terms of premium and of what john malone can bring to the equation. If we move things on, we can see that liberty broadband, who john malone owns and holds a stake in turn to communications via Charter Communications via could help. Altice has less flexibility. There is a big breakup fee of 2 billion. They are hoping to alleviate those antitrust concerns, as well. Francine thank you. Caroline hyde with the latest on cable consolidation. Coming up ryanair and their soft or to Customer Service. We are back in two. Francine welcome back to the pulse. Live from london. Im francine lacqua. The u. K. Prime minister David Cameron has met the European Commission president Jeanclaude Juncker to discuss renegotiating the terms of britains membership in the eu. David cameron will meet european leaders this week. He meets the danish Prime Minister on thursday and the french president on friday. Poland witnessed its biggest political upset in a decade. The new president s plan to tax banks and buy them back from foreign owners has spooked investors. He does not have authority to dictate domestic policies. He will gain clout in the parliament for the opposition party. Fuel retailers held back supplies in nigeria because they say they are still owed one billion dollars by the outgoing government of president Goodluck Jonathan. Lets check in on the markets. We have had quite a lot of moves and we have been looking at the yuan. Jonathan a lot going on. The ftse is off about 0. 5 . The dax is still down about 0. 6 . It is a classic riskoff scenario. The bond market explains this the best. Look at the german bond. It is down. In switzerland, the swiss 10year, the yield shopping below zero for the First Time Since april dropping below zero for the First Time Since april. Bonds stronger this morning. I am looking at a 10year in spain. The italian 10year. 1. 94 . Risk aversion in the bond market. In the fx market, it is a weaker euro again. The dollar is almost flat. Just a stronger dollar. I will bring up the dollar index for you. The u. S. Data last week. Punchy. It lit a fuse under the dollar. We have a busy afternoon and morning. Afternoon for us. Morning for the u. S. Stay tuned for that. Francine we had breaking news on china. The International Monetary fund dropped its longheld view that the yuan is undervalued. Dan why now . Why have they come out with a statement now . Dan it is interesting. They are really assessing the yuans bid to become a reserve currency. It is suggesting that the chinese should aim for a freeFloating Exchange in the next two or three years. It is coinciding with the chinese bid to have their currency become a reserve currency. The yuan is trying to position itself as a currency of choice among, not only Central Banks but much larger institutions. This is reflective of chinas rise. More broadly speaking, there really is Senate Knowledge meant is an acknowledgment that the reforms have given the imf cause to believe that it is time to promote the yuan to a reserve currency. That is what they are saying here. It is the overall policy progression. It is the timing factor we are seeing with this move. Francine dan, how significant do you think this is . Is this a good thing for china . The imf is saying that china should be granted greater flexibility in exchange rates. China has been grappling with issues at home. You see the stock price gaining a most 100 in less than 12 months. Put that into context for us. Dan ok. Lets look at the broad strokes. In terms of the frustration they are feeling at home, remember for a long time, china has been criticized for its stance on currency. The u. S. Falls short of criticizing chinas currency interventions. The move toward a flea floating freeFloating Exchange does allow them to a issues like domestic inflation. Once you have control over your currency you do start to see some competitive advantages. Being tied to a strong u. S. Dollar does stop the inflation problems they see at home. Going toward a freefloating one is not a bad one. Whether they will achieve that in time remains to be seen. It is going to always be a source of great consternation for any country when it goes down the freefloating path. It does cause that certainty factor. With the freeFloating Exchange it certainly forces them to become more competitive in a lot of areas. That is probably what the imf is suggesting here. For so long, they have been criticized for their chance stance on the currency. Francine thank you so much. Lets turn to airlines. The budget carrier ryanair had a 66 jump in fullyear earnings. The strategy to grow its Customer Base is working, they say. I have to say, it is not all about the business. We have a lot of families. At the moment, approximately 27 of our passengers are business passengers. Not all of them are on business plus. That is the challenge for us. Francine lets get more on this. Give us a sense. There was a jump in profitability last year. What were the key drivers . It is all about being more friendly, more cuddly. Thats right. Great earnings from last year. Profit up 66 . They transported more passengers. They expect 100 million passengers next year. One of the key Drivers Behind this they want to be friendlier they want to be more listening, more id active adaptive to customer demands. They have looked across at easyjet and seen that they have drawn a lot of business customers. That is something they want to replicate. The cfo said there is more room for growth. We can expect that Going Forward. A lot of times, ryanair flies to airfields in the middle of nowhere. What they really want to do is go to the bigger airports and draw in more business customers via that route. Francine what does this coming year look like for ryanair . Benedikt it is looking pretty good for them. They did say that the competition is not sleeping. There might be some irrational pricing coming out of some of their competitors. We do know that the likes of lufthansa and air france have woken up to the lowbudget market and they have positioned their own lowbudget fleets. We have germanwings. They are keen to see their models succeed as well. One of the key models is to do it via pricing. We might see some price competition. That could be the fly in the ointment going into 2016. There are cheaper planes coming to ryanair. Cheaper planes with more seats. That is one way to tackle the market. Generally, the tone was very upbeat. You can see it in the stock. The stock was up 6 . A very good set of results in a low margin market. The increase in profit was not something you are normally used to in the airline industry. Francine are we closer to iag taking over aer lingus . Benedikt ryanair plays a key role in this battle. Iag wants backing from the Irish Government and ryanair on this. We have a Cabinet Meeting in ireland today by the government. We might get an update. It is likely they will throw their weight behind the bid and then iag can go ahead. The ceo of iag said they are not in a rush to do it and they want to make sure they do it right. We might see some Movement Today around midafternoon. Watch out for that. Francine thank you so much. Coming up in the 1 00 hour, we will be speaking to the ryanair ceo, michael oleary. We are joined by barclays European Airlines analyst. Great to have you on the program. Ryanair has guided five times above what they were forecasting in the last year. This is pretty impressive. Is it because they are playing catchup or are they really doing that much better than all of their competitors . Partly, they are always very conservative with guidance. We have guidance for the full year of 2016 that includes a winter period which they have no visibility on in terms of their fares. They are suggesting that summer average fares will be up 2 and winter fares could be down. The momentum in the Company Continues to surprise them. The Strategic Transformation really has been exceptionally strong this year. Francine Underpromise Overdeliver cannot last forever. Do they guide upwards . Oliver as i say the guidance for the winter appears to be relatively conservative at the moment. There will naturally be an element of that. I think what is really exciting is that this is a multiyear transformation. There is the network, the airports, the frequencies, the soft products. The business initiatives, the family fares. There is the way that they are doing yield management. They have always had a certain mindset. Now they are moving into bigger airports, care more about revenue, while holding down the unit costs. Francine will the gain market share from easyjet and other competitors . Oliver the main competitors are legacy carriers. Are there weak legacy incumbents to take share of . I think they can take a bigger chunk within europe. You will feel pockets of those head to head overlaps. It would not be their primary purpose. Ryanair attitude is that we will move into more central airports with the lowest cost base offer the lowest costs if others get caught in the crossfire tough luck. It is very early days. They claim to have 25 it is probably a single digit number at the moment. Easyjet is about five years ahead in this initiative and they only have about 20 . That is a longterm opportunity. In the meantime, they need to get the network in the right position. Francine new roots . Oliver more primary airports high frequencies. Only about 35 of ryanairs capacity is in what we would define as primary airports. It would take many years for them to build that out. But it is a huge opportunity. Francine what is your Favorite Airline . Oliver that is a tough one. Francine in terms of potential. If you are an analyst and you are not sure where to invest. Oliver in terms of potential, i really do like ryanair at the moment. You have the structural growth story about taking market share off of weak carriers. On top of that, you have this transformation program, which is about boosting the margin. They can deliver 20 compound Earnings Growth in the next few years. Francine that is impressive. We will be live next to Southern Crown Court in london where thomas hayes becomes the first person to face trial over a legend libor rigging alleged libor rigging. Francine welcome back to the pulse. We are live from london on bloomberg tv. A former trader is in court today. Ryan chilcote is in london. Tell us about the trial. Ryan good morning, francine. Tom hayes arrived with his wife a couple of hours ago. The trial has begun. The jurors are inside. The prosecutor is effectively reading out the charges. There are eight of them. All of them have to do with accusations that mr. Hayes conspired with others inside and outside of the bank to defraud counterparties in the trades he was engaged in, by manipulating libor. That is with the jurors are being told right now. If he is found guilty in this trial that could take a good 1012 weeks, he could be looking at as many as 10 years in prison. He has pleaded not guilty. Clearly over the last couple of hours, we are seeing this trial get underway very quickly. The jury selection went quickly and it looks like the trial has now begun. Francine. Francine the banks played close to paid close to 4 billion 4 billion in fines to deal with the rigging. Tell us the puzzle. Where does this fit in . Ryan the libor fines were very significant. The banks have paid out more than 9 billion in fines. It is not like legacy stuff. Deutsche Bank Reported firstquarter earnings about a month ago and their profits were really hit by legal costs. That was mostly libor fines. It remains an issue for the banks and their bottom line. More than that, this really was the issue the investigation and concern about manipulation of libor rates. It was really a watershed moment that led to a public outcry and called for more scrutiny of the banks. As a reference point, libor is the rate that banks say they believe they would be able to borrow at. A panel of banks reports at about 11 00 in the morning and it is incredibly important 350 trillion worth of assets loans, and other assets are valued at least in part, on the back of those libor rates. It has been a real huge issue. What we have not seen are any criminal trials. This is the first time we have seen an actual trader in the courtroom, in a trial that has begun. In some ways, you could say that the regulators, the financial police, if you will they themselves are on trial today in the eyes of the general public because they have not been seen as doing enough to crack down. For mr. Hayes, it is now to prove his innocence. He will have 1012 weeks. One of the most interesting things about all this is that we are going to hear probably pretty quickly the defenses opening remarks in the next couple of days. Im sure we can expect to hear perhaps that he does not believe he was responsible for this. Back to you. Francine thank you so much. Ryan chilcote at Southern Crown Court in london. Coming up, we will look at Charter Communications potential takeover of Time Warner Cable coming up next. Francine welcome back to the pulse the pulse. John ivy has been named to the newly created position of chief designer. European authorities clear the path for a takeover of aer lingus. I ag said it would not proceed iag said it would not proceed without the full support of the Irish Government. There has been substantial appreciation of the you want yuan over the last year. The imf says they should aim for a free Floating Exchange rate in the next few years. Hans people will start getting in tomorrow. What everyone has been telegraphing is that the situation in greece will not be front and center, but it will clearly be on the sidelines of the summit. You have a lot of central bankers. You have Christine Lagarde coming in. They imf has taken the hardest line the imf is taken the hardest line on greece. The americans will try to pressure the germans to soften their stance on greece a little bit. The german finance minister does not seem like he is in the mood for that. Francine he certainly doesnt. Talk to me about cable consolidation. Charter communications is reportedly close to a deal to acquire Time Warner Cable. Hans number four would be taking over number two. This is a 55 billion deal. There is a 2 billion breakup fee. We are going to see a lot of cable consolidation in the states if the regulators allow it. Francine. Francine it is always all about the regulators. Hans nichols thank you so much. The very latest on what to watch today. That is it for the pulse. Stay tuned for surveillance. They are live from new york. Later today, the ryanair ceo will join bloomberg in the 1 00 hour for an interview that is 1 00 london time. Guy johnson is off today. He will be checking his twitter. We have a big day in terms of volatility on the markets. I would also point out the Foreign Exchange markets. I know tom keene will be all over that. Check out the dollar check out the euro. Bloomberg continues. Announcer this is bloomberg surveillance. Spreads are wider this morning as tsipras is divided. Germany notes time is running out for greece. Number three will buy number two in cable tv, leaving number one at the altar. Good morning, everyone. This is bloomberg surveillance. We are live from our World Headquarters in new york. Im tom keene. Joining me brendan greeley. Lets get straight to top stories right now. Vonnie lets start with a story breaking right now. The takeover in the cable tv industry per Charter Communications agreeing to buy Time Warner Cable, and also right house networks. We are looking at 100 cash and more than half a share pershare of Time Warner Cable. That would value the deal at 78. 7 billion. We were looking for the deal to