We are here in london. Im guy johnson. Im francine lacqua. Happy new year to everyone. What are Angela Merkels contingency plans for grace . That is a question that is dominating the currency markets this morning and is sending the euro lower. Driving the news is a report over the weekend that says merkel could look at a greek exit. Lets go to hans nichols with the very latest. What are we to believe . We basically have three different lines from the German Government officials in germany on the report. The first is that saturday night line. That was a nondenial and ill saying they dont comment on speculative reports. Then, last night, we had the economy minister and Junior Coalition partner. He would know about internal planning inside the finance ministry. He said there were no contingency plans. This morning, we have a member of Angela Merkels party, the Party Chairman essentially, saying he cant imagine there being contingency planning. What we dont have is a firm denial that the government is planning for a contingency if greece leads the eurozone and if they think that exit could be manageable. That was the thrust of the report. One note of caution, just because a government doesnt deny something, we cant take that to mean confirmation. The German Government may be playing the long game, where they think we will have a lot of these speculative reports and they dont want to be in the position to deny all them. At 11 30 local, we will see whether or not they have cleaned up their line, whether they have a digestible line on what their plan is for grace if syriza wins and well see whether or not markets except that line. Wouldnt it be remiss of a government not to plan for most eventualities . It seems slightly crazy that a government has to deny that it is planning for an eventuality, even if that is right of the far fringe of outcomes. Of course they are going to plan for everything. They cant deny they are not planning for it. The question is, if you are planning for it, then you telegraph it. You telegraph it through der sp iegel. In general, their reporting is excellent and spot on. The question is, was it intentional from inside the government to put this out there . Or did der speiegel get this on their own merit . It is significant that it is out there. The thrust of that report is that a greek exit is manageable not that it is an outcome they could plan for. Before, the line was always, a greek exit is unthinkable. That transition from unthinkable to manageable, that marks a change inside the government. Maybe before, they thought it was manageable and never publicly telegraphed it, but to me, it is a fundamental shift. That is why we see the currency markets reacting so drastically. Thank you so much, hans nichols from berlin. Lets get the other side of this story and figure out what the greeks think about all this. The Election Campaign now in full swing. Im curious to know how all this german input is playing as well. It is kind of a repeat of the situation we saw in june 2012. Weve been here before in a sense. There were similar lines with people saying both inside the greek government and officials saying the greeces member sit of the euro is in stake. This has been a bit of a bluff in the past. The question is whether greeks will believe it as a real threat or whether they think it will be a bluff. There might be a bit of a boy who cried wolf syndrome. Some people that im speaking to are more concerned. By and large, i think most greeks dont believe that greece is going to be kick out of the euro. Give us a sense of what impact the new parties may have. We had said at the beginning of the president ial campaign that he is going to sound a new party. He finally went through with that and carried it out on saturday. We dont yet have holes to suggest what kind of electoral impact it will have. The polls have been holding back before asking him. There was one that was conducted before that suggested he might get about 6 . That isnt a huge amount, but if the race is a tight one, it will make a difference at the margins. The bigger impact will be on his party. He might get some of that vote but this is a party that dominates greek politics. Theyve already collapsed. The former voters are still around. There is a scramble for those voters. You might draw some voters from the cities. He is not a hugely popular person here. This is the guy that took greece into the bailout. On the other hand, just the name alone might attract some. If he pulls 6 , which one poll did suggest, about 6 , that could make a difference at the margin. Marcus, thank you very much indeed. We will be back with you soon. Looming possibility that greece might check out of the eu is impacting the markets. Lets bring in eric nielsen chief economist at union credit bank. Great to have you on the program. Why is nobody panicking . Your colleague put it very well. Is it conceivable that somebody leaves because the market drives you out but you cant keep somebody in . If the greek population decides to leave, then you can leave. That means that the contagion effect would be a lot less. Is that true . Is that going to be the way that it happens . I want to see you start opening the door for a country leaving. It changes the dynamic completely. You see already now, with the qe backstop, it looks very nice across the southern flank. I think it is important to appreciate that the greeks want to leave. It is different from the market forcing you out. The other point that has not been pointed out enough is that the greeks will not necessarily say they want to leave. They may say, we will not have the policies you advocate. Then you can push them out. The exit would come if the greeks start to run on the banks and the ecb will not support them. It would be the ecbs decision. I understand the point that this is internal politics, not about debt sustainability. This is also the test for what future countries are going to vote. You have the emergence of extreme parties in spain. If they want to leave the euro, what are the chances of other countries doing the same . That is a good point. I think that if greece leaves it will be a complete disaster for grace. That might take the wind out of the sails of the other extreme parties. The extreme party i worry about is in france. If france starts to pull off, there is no euro. So greece is important . Greece is important for sure. It is the first test case where you see if it can hold together through this transformation to become northern european. If syriza wins and forms a government, do you start pricing that the breakup of the euro goes from being a righthand side tail risk to start moving into the center. How do you factor that in to your thinking about pricing of all assets across the eurozone . I wouldnt be too worry, in a sense. I worry very much for the greeks. But greece in the euro continues. As i said, if they leave, for me, it probably reduces the risk that any other country is about to leave. If greece suddenly prospers on its own, but i cant see this happening. Lets say, what are the chances of greece leaving at this point . And when greece leaves, what happens . I dont think greece will leave. Lets assume they leave. I think there will be chaos in greece and the ecb will be buying bonds. Therefore there will be no chaos in other places. The question to ask yourself is, what is the implications in other countries of this happening to greece . Will spain move closer or further away from exiting . My guess is that if anything you move them away from the exit. People will see what disaster it brings in people. Is there credit risk in eurozone government bonds right now . Not really. Even in greek bonds . In greek bonds, yes. But it is a very small share of the market. It is not like the effect that you have from ukraine or russia where some funds have such a big chunk of it that they have to sell other things and you have the ripple effect. Can the ecb by something with credit risk attached to it . I think they should, but they wont. It is also the greek central bank. It is difficult for me to understand that you have a Currency Union and say, i dont quite like you. That is not monetary policy. It is what the bundesbank said. If they dont buy greek debt is greece a member of the eurozone . They are because that is their currency. As you say, it is meant to be a common currency. It is not common if the central bank is buying one thing but refusing to buy another. The premise doesnt exist. I dont think that is necessarily the definition. It is a massive blow across the project. But at the end of the day they have bought it italian bonds before, greek bonds before, the fact that you buy some but not others is not unprecedented. But it is an active decision on a credit basis. Erik give us a sense of where you see the euro headed. Is 2015 the year where the euro will weaken significantly, and does it mean that a lot of forecasters have their predictions wrong . We had it wrong. We didnt see this weakening euro, but we do now. I think it will move lower a lot. How much . To the 110, 115 range, maybe. When you start moving through this space we are not talking about small moves. The only thing that is important is this it is predominantly a dollar story. You are having maybe 4 5 with depreciation so far. It is a wonderful situation. You have the central bank threatening to pound money into the system. Oil is low. You have a lot of stimulus from this side. Stay with us. In the meantime our twitter question today. Lets ask you. How low does the euro go this year . We are talking about against the dollar. Tweet us your thoughts, join the conversation. It will be interesting to get your take. Still to come, which retailers are winners and losers later in the hour. Loss, what impact will low oil prices have on the future of alternative energy in the you play in the u. K. . Welcome back. You are watching the pulse. Live on bloomberg tv. We are on your tablet, on your phone, and we are very much on what is happening in the currency markets. The single currency floating with a nineyear low, the risk for deflation mounts. The ecb maybe just a few steps away from fullscale qe. What that looks like, lets discuss that now. We are back with erik nielsen. Before christmas, you put out the note saying, 5050. Did the article from draghi move it down for you . It looks that way. For me, the question has always been, can you actually threaten it, get the effect, and get away with not doing it . He has done pretty good so far. Exactly. We have been more optimistic than most people on the recovery. If that comes, maybe he can get away with it. Also with Oil Prices Dropping and inflation lower, we have to pull the trigger to keep his credibility. You can sort of see that they have done the groundwork. Will he pulled the trigger at his next meeting . No. I find that hard to believe. There are more things he can do. He can expand the private purchases, and if you wait till march, you have the new forecast. I would be surprised if they do sovereign qe in january. When you look at how hes going to pull this together, you talk about the considerations is it possible that we can end up in a situation where the cpi data is screaming that it needs to happen but the politics is going to keep him from not doing it . You talk about the fact that the germans are on board but do you think the germans really are on board in the way that you can have aggressive qe . This is the big thing, if you dont do 500, there is a risk that people say, that is all price. Think about what happened in the america and the u. K. The more you i knows it, the more you have somebody buying the rumor and selling the fact. He must say that there is much more. He must be very clever the way he says it. The more he waits, the more he has to do. If he was to do it in january, he could get away with less. Unless the economy starts to pick up. The italians have disappointed but european pmi has start to look better. France has disappointed. Exactly. You need better numbers in the big countries. As i said before, the die has probably moved. The germans dont like it. But i think if you see all the statements from the german politicians, they are saying nothing. The central bankers are saying, we dont think we are there yet. Ok. In my mind, the argument is beyond whether they do or dont do it, it is just a question of scale. And timing. Timing to a certain extent. If they come through and go large, if we go one billion, that tells you that everybody is on board. If we get 250 500, that tells you that not everybody is on board. They have to pull the horns in a little bit. That shows the ecb could be quite weak. I think less than 500 is impossible. Draghi will make a blunder beyond. I think if you came out with a couple hundred and said it would be catastrophe. It could be complete chaos. If you pull that trigger, you have to do whatever it takes. What does that look like . Minimum 500 with clear statements that this is just the first one. We will do whatever it takes until we see the deflation risk having disappeared. My guess, given the fact maybe there is in january some private sector stuff to extend sovereign qe at 500 with a clear indication that there could be qe 2, 3 4. When we had news they were going to publish, the ecb, in order to be transparent, you were on set with us. What does it mean for the markets . Here, we have a very clear indication of where the ecb stands. We will see how much they actually published. I remember some years ago, a governing Council Member said to me, you would be very disappointed. You never really know what it is. You never really know how much they will tell. The other side of it, sometimes you see this list of the members, i dont think it is quite like that. My gut feeling is that there are people who probably he always sees himself between the germans and french. I dont think it is quite right to think it is black and white between people. Nobody everybody will have hoped the economy will do better, but at the end, it has to be do or dont do it. Erik nielsen, global chief economist at unicredit bank. How realistic is a split between greece and the eurozone . What happens if the greeks decide to go their own way . We will discuss the implications and possible contingency plans, next. Welcome back. Quick look at the equity markets. First real day back in terms of trading. The ftse, one of the few exceptions. The ftse now down by 0. 5 . Most of the continental markets, reasonably well bid. You can follow me on twitter. See you in a couple of minutes. Welcome back to the pulse live from bloombergs European Headquarters in london. These are the Bloomberg Top headlines. Irans president has said that his country cant achieve sustainable Economic Growth while living in isolation. Rouhani told a conference on Sustainable Growth and job creation that iran would not suffer from becoming more transparent about its nuclear program. Progress in negotiations have won the country some relief from damaging western sanctions. Indonesian whether officers report on the path of the crashed air asia jet. The plane appears to have flown into a storm cloud and ice may have formed around the engine. Rough weather has continued to hamper the search for the black box flight recorders. Search teams recovered four more bodies earlier today. In an interview with the bbc David Cameron has said that his proposed measures to reduce new immigration into the u. K. Will require proper full on treaty change. The referendum must take place before the end of 2017. If we could do that earlier, i would be delighted. The sooner i can deliver on a renegotiation, the better. Now, the holidays are over time for retailers to take stock. Here with more is European Business correspondent Caroline Hyde and charles allen. Thank you for joining us. Caroline, we have some figures from john lewis. Building on a trend that we saw from next is online is where its at. We saw john lewis performing very well, like for like sales up almost 5 . 777 Million Pounds. One Million Pounds spent per hour in the five weeks up to december 27. We had a slight downtrend, then a pickup in the panic buying before christmas, then the sales after boxing day. Online growth, up 19 . One third of all john lewis sales are going online now. That is where the growth is click and collect. More than half of all purchases being done online but then picked up in the store. Many people felt that doing online would mean people wouldnt buy in stores at all. John lewis had flat sales instore then a big pickup online. It was all about the new espresso machine. Interestingly, one other area was discounters. Little, it was reported, had 20 growth in like for like sales. More champagne sold than milk. I love that. And the nutribullet. You have the champagne before and then you detox. Charles, in terms of the way the retailers have set themselves up, were they in the right position with stocking with delivery times, to cope with what appears to be a changing dynamic . They definitely changed. John lewis there week week used to be just before christmas. Black friday week was easily a beat. Implicitly, theyve may be not done as well as they thought they would. There are higher costs. Particularly online. If you want everyone to be delivered on the same day, you have to employ more people. You are also selling things on promotion. There is a suggestion they may step back a little bit from black friday. The whole point of christmas is you sell at full price as next did. Thweir best week, the week before christmas. I think we have seen a big change with the sales brought forward to the end of november but maybe the bill maybe people stepped back from this. What about tescos . We now get more unveilings from the high street players. This is of course grocers. They have been having price wars abound. Sainsburys comes out on wednesday. We will likely see like for like sales decline. Anywhere up to about 3 . And an s does well on the food front. We trade up for a bit of luxury. General merchandise, they did not set themselves up for online. They had disruptions. They couldnt deliver the next day as planned. They are going to have problems in general merchandise. Tesco was all going to be about the recession. The trading has been quite difficult. It is really about how they can set themselves up to have the right price in their merchandise and the right cost structure for what is going to be a slimmer operation. That means things like researching in head offices that they told us about in the u. K. They told us in october, that number is going to come down the number of people in head offices. The way they buy merchandise has to become a lot less compl