Show but first things first. A couplet to spain in of minutes but this is what your markets are doing. I want to keep a little bit of an eye on the euro. Euro little changed as the catalan president prolonged uncertainty over the regions next move towards independence. Want to get you to treasuries, study. European equities edging lower. With investors looking for the release of the meetings from the ecb. Lets get to first word news. Sebastian catalonias president has kept the rest of spain guessing on if and when he will declare independence. He reiterated an offer of mediated talks while attacking king felipe vi. King made his speech, the politics of rajoys government that has been a catastrophe towards catalonia and ignored the millions of catalan that you not think like them. It ignores the catalan that have been victims of police violence. The treasury secretary up puerto rico was calling on provide billions of dollars in emergency funds. On tuesday, donna tim suggested the u. S. Commonwealth might wipeout its debt. Puerto rico has beaten down benchmark u. S. President donald trump has said he has total confidence in secretary of state. In response to reports that the secretary of state referred to the president as a moron. Rex tillerson says he was committed to the role. Global news 24 hours a day powered by 27 journalists in 110 countries. This is bloomberg. Francine thank you. The stakes are rising in catalonia. S p said the escalation of the crisis could hurt the credit ratings. How is this uncertainty affecting spains economy . Yieldsx has fallen and on spanish bonds have risen. We welcome the spanish economy minister. Minister, we want to focus on the business side of this and the implication for banks. First of all, investors want to know whether there is a lastminute mediation chance between the Spanish Government and catalonia. Good morning. Well, first of all, i want to make a point that i think is very important, very relevant. The independence of catalonia is not going to take place illegal. Ecause it is and the Spanish Government guarantees that the enforcement of the law is going to be perfectly implemented in spain. Secondly because it is irrational. Catalonia has always been part of spain. The two economies are very interconnected. The connection between spain and catalonia is ver y profound. The catalonia government has a lot of autonomy. They are a very prosperous community. I think it is important to say that the independence of catalonia will an detrimental to catal society. And the Spanish Government is not going to allow that this could happen. Are defending the rule of law. Francine minister, you also have to make the country come closer together. How can you solve this . Is financing enough to get catalonia back in the fold, or is it too late for that . Well, this is not a wasting of mediation at all. This is a question about enforcing the law. The rule of law is very important. Its report not only in spain but all over europe. Catalanthat now the government is out of the limits of the spanish constitution and outside the law. The main reason of that is because the group of the Catalan Government that is calling the shots is a coup, a radical group with a lot of anarchists links and bonds, and they are setting the agenda. And this is going to be detrimental, and is something the people have started to realize is happening. Francine there has been real real talkas there been at the cabinet level of implementing article i55 . Talk about want to complete instruments. What i can tell you is the Spanish Government is going to respond firmly and with prudence. But we are going to enforce the law. We cannot accept because of the radical approach of the Regional Government and the coup, that this could have a very negative effect on the Catalan Society. We are going to defend the interests of the Catalan Society and the rest of the spanish people. We believe that legality is key. We believe, also, that the catal an society has started to take advantage of the recovery of the spanish economy. The spanish economy has been growing 3 over the last three years. Catalan economy is outperforming the spanish economy. And we cannot accept that because of the legality of government and because the radical approach of certain groups, this process could be derailed. You talk but minister, about legality but given how bad the intervention was to stop the illegal referendum, how confident are you that if the cabinet were to choose to implement article 155 that this would be done in the correct terms . All, you know,of i think there is an important point that was in the discussion that the European Parliament held yesterday. Is that the rule of law is the main point that we have to enforce. Its the legality we have to defend. There is nothing acceptable outside of the legality. We have been totally open to debate with the Catalan Government but always it has to be within the framework of legality and the framework of the spanish constitution. If we except any short of lets say mediation, what we are excepting is a dangerous precedent for spain and the whole of europe. Francine what im trying to understand is would be the same police that when in on sunday . Went in on sunday . The Spanish Government has different instruments. In order to enforce the law. You can be totally sure that people will be hearing spain be totally assured that we are going to use the estimates we have available in order to enforce the law. That is the first principle. Im not going to secondguess what the Regional Government of catalonia is going to do but what i can tell you is that the Spanish Government is fully convinced and fully determined to implement the rule of law with all the instruments we have available. Francine minister, both Prime Ministers of france and belgium have errors your Prime Minister to open negotiations with the Catalan Government. You mentioned that there were some conversations you had with their european counterparts. Are they more worried about being heavyhanded or that this could be seen as a precedent . I want to put it very, very clear. This is not a question about mediation, of arbitration. This is a question about a government that has the obligation to enforce the law. Our Regional Administration that is out of the law. Because it is following the negations and the agenda of a very radical group. So, i think there is nothing to negotiate. Withouth, you know, the full respect of the rule of law. Theif they are back to spanish constitution, if they start to respect the boundaries and limitations of the spanish constitution, i can assure you that the approach of the Spanish Government has been to have an open dialogue with all of the Regional Administrations in spain. This has not been the case of the catalan administration, unfortunately. To discussot open any kind of solution within the boundaries of the law. They called an illegal referendum. They now are thinking about the possibility of, you know, a unilateral declaration of independence. I can assure you that if that would happen, the response of the Spanish Government will be very clear. Francine lets talk about some of the banks. Catalan lenders have been pulled into volatile politics. Weve heard that some clients have tried to move assets. An idea ofe us the flows you have been seeing over the lack six days . Well, the first thing i have to say and i think this is quite relevant is that these letters, the financial institutions, our andreign catalan spanish and european institutions. While they have indicated that as this process goes on, they are open to locate their headquarters to other places in spain. This is a clear indication about how insance is the Regional Government of catalonia. The independence of catalonia could take catalonia outside the union outside the eurozone. Andould effect the flows the quality of the savings of the catalan people. So, that is why we are fully determined to defend the entirety of the unity of spain. And this is something we are going to put very clear. Francine minister, at this point can you allow thatcan you rule out deposit outflows have accelerated . Here the, you know, main point is that, you know, these institutions are quite solvent, are very strong. And they have clearly indicated and they have conveyed the message to the marketplace that the are going to defend interests of their depositors, the bondholders and the clients of the banks. And i think that is a very clear indication about the objective that they want to maintain and to accomplish in the near future. Beyond shortterm reactions, i can assure you that this, the management teams of these two blunders are fully committed with the clients, depositors and shareholders. Francine what happens in the event of a secession, which i understand is something that at the moment you are not envisaging. Can you reassure depositors in catalonia, how do you reassure guarantees . H your finance ministry would step in . Well, first of all, the secession is not going to take place. That, this is not going to happen. This is something that is very important. The Spanish Government is not going to allow the independence of catalonia. It would be totally, its totally out of the question. As i have said before. So, i do not contemplate this scenario. I know perfectly, you know, the approach of the Catalan Government that is out of the law and totally irresponsible. So, the determination of the Spanish Government is very clear. We are going to fully enforce the law. Fully determined and committed to the unity of spain, because we think this is the best for the catalan people and for the spanish people. Francine i understand, minister. You said that very clearly, but how do you deal with the depositors . If there is a run of the banks in catalonia, what happens . Again, this is not going to happen. Catalonia is not going to independent, i can assure you. This is not a scenario we have contemplated. We are fully committed, i have to repeat, to take all the actions and use all the estimates of our at our disposal to avoid that. Francine i understand. Longerterm, do you worry about the shift of business from catalonia elsewhere regardless of the outcome . If you look at the recent evolution of the catalan economy, even during the summer, very resurvey, the catalan economy has been outperforming t spanish economyh. The reason why is because investors to not believe in independence was a credible scenario in the near future. Well, so far, even, you know, yesterday we had some leading indicators, pmis, i can assure you the evolution of the economy is not bad. There is a lot of uncertainty in the marketplace now but the recent evolution of the catalan and spanish economies has been quite positive. We are outperforming our peers. Our exports are growing at a rate of close to 10 . Capital expenditure is there. So the commitment and the target of the spanish economy is to maintain the pace of this recovery for catalonia and for, you know, for spain. Francine minister, i understand at moment you do not want to contemplate it turning ugly with the banks, but how often do you speak with the heads of the catalan banks . What are they asking of you . Well, maintain talks and conversations with these banks. The only thing that i can say is that, you know, they perfectly theyey know perfectly what have to do to defend the interests of their depositors, their shareholders and the clients and they are fully committed with that target. I talked with them, you know, and not only recently but over the last years. Last years. That is my obligation to listen to the Financial Community of spain and globally. But i can assure you that they have the ideas here and that they are fully committed to maintain the interest and to ir depositors and shareholders theyre going to do the best for their institutions. Its important not only for spain but also for catalonia. Francine minister, what are your plans for debt issuance at this point . Today, we have an option but my impression is that for spanish bounces going to be quite important and quite high. Francine do you worry about the spreads . Have you had conversations with the bank of spain or the ecb . Do you worry that the spread between german and spanish bonds is widening too much . Well, we have seen a certain widening. Something around 15, 20 basis points. Think theow, i reaction has been quite moderate so far. The reason behind that is the strength of the spanish economy, the commitment of the government to the efforts. Well, i think that even the situation of the spanish Financial System really guarantees that the evolution of the economy, despite the noise and the problems that we have in catalonia, is going to be performing very well. Francine one last question, because i know you have to get on with the day job. Spains debt repayments to not seem at risk that moment the when do you envisage it becoming a problem . See any sort not of problem. We are reducing our fiscal deficit. Our treasury is coming down quite clearly. And simultaneously, we have a recovery that is firming up and is gaining momentum. And, well, i am quite confident that the spanish economy will outperform our peers. Francine minister, thank you for your time to bloomberg. That was the spanish economy minister. A pretty strongly which. The message was pretty clear. Pretty strong line which. Language. Sebastian controlled by the russian billionaire owner is trying to raise 1. 5 billion in an initial public offering. The company which owns coal stakeand estatein a in russel. To man sachs has agreed lease out the building and frankford ahead of the uks departure from the european union. In frankfurt. Two people, it is renting 10,000 square meters, enough for 1000 workers. Deutsche banks head of investments is leaving the banks Asset Management unit as the lender reorganizes the business ahead of an initial public offering. Hell depart by the end of the year. The units ceo sent a memo. The cio of active products will head the investment group. A spokesman declined to comment on behalf of deutsche bank. Thats the Bloomberg Business flash. Francine now, puerto ricos benchmark bonds hit a record low after President Trump suggested the commonwealth may wipe out it 74 billion debt. Bond prices erased some of their losses after administration of visitors Administration Officials walked back trumps comments. Well, for more, we are joined live by bloombergs paul dobson. And the Global Market strategist from j. P. Morgan. Paul, thank you so much. How big a deal is this . Trump says something and everything crashes. Yeah, well, i think i ts more interesting for International Investors than it puerto rico not a market where there are many people from asia or europe investing. Its mostly hedge funds at this point. Whats interesting and why it matters little bit more is two reasons. One, this is an unprecedented move in the muni bonds market and unprecedented comments because the idea of wiping out bondholders completely is unheard of in his thats one reason why International Investors have started to favor it more in the last five years. Billion worth00 of Holdings Outside of u. S. Thestors are drawn in by relative stability. Francine when you look at the muni markets, is puerto rico the biggest risk . Puerto rico is definitely out there. And obviously the kind of tragedy of the hurricane made it that much worse for those investors and for their markets and for the island as well. There are other pockets of risk around the u. S. Of things that International Investors might not a been so aware of as they started to step in. For example, chicago, new jersey, connecticut, all of them thathigher yield premiums are teetering a little bit. So, if you are an International Investor it is a risk you might not have thought of. Francine does it go to the wider concern that the markets have to deal with when it comes to President Trumps sometimes words . That is the bigger theme is that investing does come with Political Risk at one of the top forefront of the markets. So, if you do have Global Political events that affect things like yield or spread on government bonds, then you do have to have a bit of that worked into your investment. Francine youre an investor. I remember when one of the first thing he tweeted about toyota and the repatriation of money into the u. S. And stock prices we dont know how to deal with it. There is a lesson is that in that things can be said in any realm of politics, brexit or u. S. Foreignpolicy and until things are implemented it is hard to make a long Term Investment case. The puerto rican bonds is that where you see the price has regained based on the rest of the administration saying this is probably not as feasible as initially pointed out. Francine is there one person and the administration that seems to be in charge of this kind of communication . [laughter] paul i dont think anybody really knows who in charge. There is so much risk out there. This can happen or be implemented almost on a win. A whim. The voice of reason tends to be slow to catch up with the tweets and that raises the risk and, thereofrefore, the premiums. Ni market is the mu different because you have a different type of investor . We are far more interested in the u. S. Market or u. S. Investors are focused on muni bonds. It is a slightly different, more home grown investor that invests in the muni market. Francine i dont know i