Transcripts For BLOOMBERG The Pulse 20150113

Good morning, everybody. Youre watching the pulse. Im guy johnson. Im francine lacqua. We begin with the show checking out what the oil is doing. It is hovering around 45. Were hearing about this standoff between shale producers in the u. S. And of course opec producers. I guess the question is everybody is asking themselves how low does it go . What is the ultimate end game in terms of where prices stabilize . A critical question, i think it is going to be one of those questions that is going to run through every single conversation. In davos. Everybody is going to be talking about this. This is affecting every business. It is also affecting the data. To be infected. I would say infected. That is a more accurate description. The bank of england looked through the higher level of oil. Will it look through the lower level . Oil prices very difficult to predict. It will be the biggest game changer for airlines and companies around the world. In an exclusive interview ahead of greeces general elections the countrys finance minister tells bloomberg that an exit from the euro is not impossible. He was speaking with our reporter, Elliott Gotkine who joins us from athens. Good morning to you, francine. He didnt seem particularly worried about many things, the finance minister. He seemed quite relaxed when we spoke to him in his office in athens. Whatever wins these elections, he may be doing less stressful things than being financester. He didnt seem perturbed about the possibility of a greek exit from the eurozone. He thinks that even if they were to win, they would not do anything too crazy. Responsibility transforms whoever runs the country. So i assume that rationality will eventually prevail. The question is how quickly. And greece doesnt have much time. There is a deadline of february 28. Of finishing the review with the i. M. F. And the European Partners and the e. C. B. And that whoever runs the government has to have in mind. The finance minister adamant that if they win these elections, of course the Campaign Promises to negotiate and write off some of greeces debt. It were to win, it must abide by greeces commitment to its creditors. He is maybe less involved in the politics of all of this. He is for instance not a member of n. D. , new democracy. He clearly thinks the economy is safer with the current administration. Is that just him being a politician or is it a real view of his . Well, i think he genuinely thinks that. He certainly thinks that the economy is in safer hands if the current government wins. Not just because its economic policies are better. Also because they are clearer. They know who they are dealing with if the current government remains in power. It will be huge, i believe. The market also take off. Contracts will be written. Investments will flow. I think we will be surprised positively. If you dont win, will that mean recession lack of investment and going backwards for greece . I cannot talk for the opposition, but if we do not win, it means delay, at least of a month or two. The quicker they manage to come with a plan, the better off it is for the economy. The lack of clarity, the uncertainty that is prevailing now and it could prevail where the antiausterity position is. Even if they win, it doesnt necessarily mean they will be able to form a Coalition Government. Perhaps they will have additional general elections as we had in 2012. The word that seems to be springing to mind that im hearing a lot at the moment austerity. We have an exclusive interview with wouvent key Economic Advisors who was announced as a candidate in the upcoming elections. He will be joining us later on the program. Should greece be in the eurozone . Tweet us. Im flacqua and he is at guy johnson tv. Lets get back to the u. K. Now and the Inflation Numbers due this hour. Yeah, that is the other big story were watching carefully. The price of oil. There is a number of factors in the mix. The eurozone cant be excluded in any of this, as well, a significant factor for the u. K. Economy. Joining us us is u. B. S. s economist, David Tinsley and also as we have already heard, our International Correspondent hans nichols is in london today. Good morning, gentlemen. Good morning. David, let me start with you. We are watching a world of lower prices low inflation, economic risk, political risk. Is this an environment in which any central bank is likely to be tightening rates . Not right now i think that is the answer in the u. K. You have the general election risk on top of all of that in the u. K. As well. Any near term rate rise is out of scope. I think the narrative of decent growth in the u. K. Because cash flow is solid and wage is picking up a bit. Clearly the timing of that is beginning to push out of it. At what level do we need for you to say that the u. K. Is losing momentum . Well get that from the inflation data. The p. M. I. s last week, the age as come off of u. K. Growth. When youre looking at inflation rates, there is po tension over the next few months. The pay growth at duo, youre looking at a bedrock of consumer demand that is Pretty Healthy in the u. K. I dont expect too poor outcomes. You do see some upward pressure . Some moderate upward pressure over the course of the next year or so. The m. P. C. Should be looking at this two years ahead. This is not about inflation today. This is about a price level. Not really about inflation. The eurozone. Lets talk about greece. Lets talk about the broader picture. The u. K. Economy does not exist in isolation. It is a big, big trading partner. It is experiencing what some would describe as deflation and certainly very, very low growth. Greece may be isolated. It may not be isolated. We simply dont know. Given that backdrop, how do you look at the u. K. Economy and the eurozone economy and find anything that is meaningfully significantly positive. The trend in growth is becoming normal. We get inflation growth. It would exist in a normal world. I think it is fair to say most people in terms of growth would have a pretty down beat view of the eurozone anyway. The interesting thing about the q. E. Debate as far as the eurozone is concerned is that people expect q. E. Duthey dont necessarily but they dont necessarily expect it to do much good. It is grolte positive and inflation positive. Do you think that is like sflip i think the Academic Research for the u. S. And the u. K. Experience is that q. E. Works. It may take a year, two years. More than 500 billion . Does it need to be north of that number . If you look at what other jurisdictions have done it is considerably more than that. A couple of trillion that have been put out there over the last few days and more in the order of what the other Central Banks have done. The first step is never going to tell you the final destination. There are difference between the other two countries is that mario draghi talked it down. He has managed by talking to bring it down. Just by threatening to do it. Yeah. But i guess you to come up with the good at some point. I think the market would be very disappointed for all intents and pumps if they didnt flag q. E. They dont have to buy the next day. But they need to for all intents and purposes say. Berlin you talk to people, and what are they saying . That berlin is onboard with it . No. It is amazing. Every time we get new inflation data, it has to do with oil. They want to keep seeing what the difference is between core inflation and headline inflation. You hear that that the price is going to stimulate the economy because oil is going to drop down to 40 45. It is stimulus. My only other country on that is at what point does it become less than what france seen drinking every night. Alcohol. That is 45 a barrel . Now were talking. David, in terms of how much does the German Government actually talk to us to mario draghi and how much do they give their consent . Angela merkel saying absolutely not. We dont want that. And then we understand people familiar with the story. She is ok with it. Right now were in the fine details of planning, if you sort of read dean with the lines in terms of what the staff has been working on. There is a lot to play for there. In terms of liability. Do they appear on national Central Banks or in the euro system as a whole . It makes stones carry on talking tough now. I dont think that is about whether they nabt some form of q. E. Or not. It is more about the details. All right. It seems like to germans, clearly they have given up the fight on the size on whether or not there is going to be q. E. And they are focusing on the size. What they buy . Yeah, what they buy. Is it going to be greek bonds . We get this decision in luxembourg. Delivering on that tomorrow. It certainly is. Im just check out the belvedere wine list. Ok. Guys, thank you so much. Stay with us. Well be back with these guys a little bit later. The inflation data out in 17 minutes. Also coming up well go live. Ready to release results. All that and much much more coming up on the pulse. Welcome back to the pulse. Were live on bloomberg tv and radio and streaming on bloomberg. Com, your tablet and your phone. Airbus is about to start its annual News Conference. Well see if aisle prices have had an impact. One of the critical things could be the level of the euro in the year ahead. Bloomberg news is there. What are we going to hear from the team . The conference is starting in just 15 minutes from now were going to get orders and deliveries for 2014 as well as the forecast for this year. Now in terms of orders according to analysts, airbus might actually do better than boeing. Boeing had last year 14032 net orders according to analysts, airbus might beat this number. They had a nice push from the a330. A 20yearold plane that was successful in the market so they decided to put a new engine on it. That plane has been doing pretty well last year. Then of course you have the commercial success of the a320. It has been the best commercial success ever for airbus. It is going to be delivered later this year in the Fourth Quarter. And then finally of course the a350, which is behind me. The first plane, as you remember, was delivered just a few days before christmas to qatar air ways. It might be difficult for airbus to beat the number of deliver roifs boeing over last year deliverries of boeing over last year. The priority for this year is to run production, especially on the a350 because at the moment they have no delivery slots until 2021 for the a350 which illustrates the success of this new plane. At the same time there is still a lot of concern surrounding the a380. Prosecutor yes, of course there will be questions during this press conference about the future of the double decker. It is a flagship plane. It has no new orders from the Passenger Airline last year. The only order they had was froming companies. As from leasing companies. There was some concern about whether the program should be discontinued in 2018. The last time we spoke with them, they said it was a crazy idea to cease production. They will find new customers for the a380, especially in asia and then of course you have the question of the engine of the a380. Emirates which is the biggest customer has asked for a new engine. This is something airbus is not in a hurry to do but may do it in the longer term. The 380 neo. Kind of cat out of the bag on that one i think a little bit. Well find out more in a little bit. Well be talking to the boss of airbus. The c. E. O. Of this business. That interview coming up at 11 30. Also coming up, the United States Central Command 2013 accounts have been habbed. Find out who is claiming responsibility and whether anything classified was leaked. That is coming up next. Welcome back to the pulse live on bloomberg tv, radio, streaming on your tablet, phone and bloomberg. Com. Ok. The issue of the day, one of the issues of the day is oil and as you can see, we have seen a significant another significant leg lower. In dab dab d abu dhabi i we see the opec strategy is not going to change. It is up to the United States and the shale producers to blink first. Opec will not be changing course if that does not happen. That has sent the price of crude down 3 as you can see. That is having an impact all around the world. Future Interest Rates especially in the United States. The United States Central Command twitter and youtube accounts have been hacked. Hans nichols is here with the latest. Was anything classified leaked . The white house, the pentagon, the f. B. I. All say no. They say this amounts to a prank, not a serious security breach. The public 2013 for the Operational Command in tampa was suspended for more than 30 minutes and their youtube account was compromised and there were comments about killing u. S. Soldiers. And documents planning for contingencies for north korea or china. Sensitive stuff which the white house now says was all publicly available. There is quite a bit of egg on the face in the u. S. They said the military networks were not compromise pd. Were viewing this as a case of cybervandalism. Cyberembarrassment too. Do we know how they did this . Isis looks like a reasonably deconstructed but well organized operation. Like a business. We dont know if it was isis. It is people claiming to be affiliated with it. They will be able to figure that from where the servers were on the initial account. If they wanted an extra degree of security they contact 2013 and get that blue check like we do when youre trying to figure out if it is a real person tweeting something out. They didnt do that and were not afforded an additional level of security. I suspect there will be some dressing down in tampa this morning. All right. Thanks so much. It goes to the crux of what we were talking about yesterday. Cybersecurity in 2015. This has implications for a lot of companies around the world. Hans is going to stick around throughout the day. Were enjoying him being here. As we head to break lets check out the value of the british pound. U. K. Inflation data out in four minutes. Cable at 1. 5122. We may see levels last seen around 2000 when we got a. 5 read. The guilt curve. Of course the quirky british mean that if it goes to level that guy was just mentioned, since 2002, the government will have to write an open letter to you know, the bank of england. I love it. It probably goes back 300, 400 years. No, it doesnt go back that far. To the beginning of the blair administration. When the bank was given independence. Is that bank embarrassment coming from cyberembarrassment . The governors have been writing letters. It is a little flexible. Understatement of the year. Were going to take a break and talk about greece a lot in this show. Join the conversation on twitter. Im at gay johnson tv. Francine is at flacqua. Should greece be in the eurozone . Hans nichols is also here today as well. That is his twitter at hans nichols. Well take a break and see you in a moment. Welcome back. You are watching the pulse echo we have numbers out from the u. K. As is the lowest level the weve seen for inflation in the u. K. Since 2000. This is a huge and important number. You can see that the chancellor will have to write a letter to the chancellor. The governor will have to write a letter to the chancellor. Its actually that are than expected. We were expecting different. The noncore is below estimates. Is likely going to be further affected by the january numbers. David tinsley is still with us. Your thoughts on that . Its going to go lower. If you throw in the petro price you could get a negative print on year on year cpi. Its not come down as much, nonetheless its a long way short of two. This is great news for the u. K. This is consumer positive. What does it mean for wage growth . What consumers can demand more wage growth and still buy more stuff. You were going to see wage growth to an extent. 80 basis points, right . I am terrified i am getting it wrong. What was a difference between the eu . What we are saying is oil is having a bigger effect in the u. K. Potentially. Is that right . Assuming my numbers are right. On that basis it could be right. We usually like to go the other way around. What does the bank of england make of this is the question everyone will be looking at. When inflation was up in the fives we were looking through it and not worrying about it. We were not changing the policy. If you can hold up to expectations in medium terms, then you neednt worry about the current rate. You worry about where you are headed. Nonetheless, you dont need to you are not in a eurozone position. We dont have an output gap and high unemployment. There isnt structural deflation. We are not there. The figures are more or less the same. They are comparable. This gets back to the german argument. You dont need to look at these numbers. It need to look at what the price of oil is doing to consumers pockets. Is that right for spain . Spain is a higher unemployment and via. Spain is growing faster than germany at this point. In a way the thing about these countries is you need to get a nominal gdp in order to facilitate leveraging. If you do get stuck in this dynamic, its well south of one or 2 . If you look at inflation and the price of oil going down, it adds to gdp across the board for exporting companies. If you look at the net outcome . There are winners and losers. The losers tend to be countries where there is a lower propensity to consume the services they run up on oil prices are high. The price may well be positive with winners and losers. Lets talk about politics. It strikes me that we could look through the number and its meaningful, but its not as meaningful as the political story. We have the general election covenant. The outcome is very open. We may wind up with a minority government. We may wind up with a very loose coalition being formed. It could be labor or the conservatives leading that. How much uncertainty is that going to create . How much political drag are we going to see in the u. K. Economy . I would distinguish between the u. K. And cap nettle europe. There is a lot of uncertainty in this election. We dont know the result. We do know when we get to the other side of the election is that the three largest parties in the u. K. Will have 600 of the 650 seats in the house of commons. These fringe parties like the Independence Party will not exert much power in the u. K. In europe history dictates that its not good. If you wind up in that kind of very difficult and uncertain environment, you have to wonder whether or not one of the things is the stability the coalition created. If we wind up with a minority government, you have the other end of that stability. At the end of the day, the difference between those who are going to be in charge of economic policy, it can be overblown. These very on the degree of regulatory pressure. Ultimately, its not the game changer that things might be in spain or greece. Thank you so much for now. Lets run you through the top headlines. Five days after the terror attack in paris, 25,000 people went out on the streets of dresden last night. They demand tighter immigration laws. Counter rallies drew over 100,000 people in cities like berlin. President obama has proposed legislation to protect consumers and students against cyber attacks. Hackers posted personal information and what appeared to be military plans. The Defense Department says it is a prank and not a threat. Sales fell 3. 1 . Like other big supermarkets, morrisons has lost shares to discount chains. He has been the ceo for five years. He will stay on until the yearend results. The airbus News Conference is underway. It started just a couple of minutes ago. Lets have a look. That is ongoing. Were going to take you to the guy on your screen the moment. That is the ceo of airbus. He started off talking a little bit about what is happening, making reference to the recent air asia disaster. We will talk to him about what is happening with his business later on. This is a feed we are getting from there. We will continue to update on what is coming out of the News Conference. They had 1456 orders in 2000 14. We are joined from athens by an exclusive interview. We are on the pulse. Welcome back. We are live from bloombergs london headquarters. Lets talk about what is happening in athens. This is an exclusive interview with 12 days to go before the general elections. He spoke about the risks associated with victory to the opposition party. They have to obey the commitments that greece has signed. Greece received huge amounts of money just from the europeans 195 billion dollars. When we made those commitments we were great. We were not particular party. This has to be understood. Have greeks stopped paying taxes . Its very natural before elections to observe a freeze. Some people hope the new government would, and exalt them of their debt payments. Absolving them of their debt payments. They are postponing contracts. The economy does stall. Once the elections are over then i think there is pentup demand and the country recovers. Can you quantify the drop in tax take, is it likely to derail the greek budget . The budget for 2014 had a big cushion. The target was for one half percent of primary surplus. Up until early december, we were forecasting a primary surplus of 1. 8 . These decimals that provide enough cushion is not going to affect the eventual target. They have to abide by the agreements that greece has signed up to. Lets go to athens where we are joined by an economic adviser. He is at the university of athens. Thank you so much for joining us. Give us a sense of what you would do. How much would you renegotiate debt . Would you come up with another concoction . Our objective is to restore a sense of originality in the debate. That me put it in a way our viewers can understand it in 2010, our nation became insolvent. Wisdom europe address the problem. They unloaded the largest loan in Human History on the most insolvent european states on conditions of austerity that shrunk the national income. It was a typical case of extend and pretend. It was applied to a whole nation. It is no wonder that greece remains in the news and you have us on your program very kindly. This is the nemesis of hubris. If you are in denial about the liquidity problem and you take a huge amount of money and depth it on an insolvent entity, you are deepening the problem and extended into the future. We want to end this cycle that has real repercussions for europe as a whole and is leading to pulp a proud nation. Is the option you face binary like this . You exit the euro or you have to accept further austerity . It looks like thats what youre getting from the rest of your. You can extend and maybe you are pretending or you exit the eurozone a. Are those the two options . Can you renegotiate the debt that everybody says you cant . I know we will renegotiate. Its like the laws of nature. If you throw a stone out of the window it will fall. The greek debt is unsustainable and Everybody Knows it. It will have to be haggled. How can we do it in a way that is mutually beneficial for the whole of europe. Especially in environment where they have lost control of Monetary Policy under the deflation scenarios we are facing. It is destabilizing for the whole of europe. It takes a degree of silliness to think you can think about exits and then contain the after affects as if this can be done in an orderly way. Let me just jump in. Have you spoken with german officials . Have you spoken to eu officials . What is the message you are getting from them . Is a possibility . The message we are getting as the election approaches and it is becoming clear to officials that we will probably form the next government, we need to reach a mutual compromise that will render the greek social economy sustainable again while at the same time not undermining the European Unionss destabilizing itself. It has to work for the benefit of everyone. You are going to have to reach to compromises. What a shortterm and what is longterm. Do you think you will be able to secure a shortterm solution and agreement before the end of february before this critical date in terms of the current financing plan and give yourself the breathing room necessary to negotiate a longer term plan . If you were to assume authority what would job number one b . To negotiate a shortterm solution . That is not a deadline. There is nothing happening that makes this necessary. It is an arbitrary date. It needs to be extended. The critical date is june when the ecb holds bonds that were foolishly purposed. Were going to find a compromise on this. We will give breathing space to europe and greece so that we can come to an agreement before the bonds expire. Let me say that our task ahead and for the central bank and the European Union is threefold. We need a significant debt right down to render the economy sustainable again. We need to find a way of packaging this in such a way that it can be sold in berlin. We need to find a developmental plan for greece, including reforms that will render the economy sustainable in the future once the debt has been restructured so greece can read within the eurozone again. One of the proposals that i read and some of the local press is a debt swap. And i right . Let me say that you are right. My proposals of been like this for a number of years. It should be investor proportional to nominal gdp performance. If no haircut is necessary, that would require a healthy nominal gdp growth. We can swap the existing debt with risk bonds, gdp bonds in such a way that if we manage to affect an Investment Plan that will lift our Economic Performance to such a level that no haircut is necessary. He will be able to sell this to the zone of parliamentarians. Europe is becoming a partner in Business Growth and not in greeces misery. There has been a positive reaction to this. There is always the distinction between officials statements and unofficial messages. You can expect the negotiating parties to compromise, can you . You cant. Figuring out exactly where everybody stands or dont stand i want to ask you about that. There is an expectation that i am hearing from so many people that he will perform a political and economic uturn. If you talk to people from paris to berlin to brussels, they expect some sort of political uturn to be delivered. You speak to them on a daily basis, is that what you are hearing from him . There will be no uturn. There will be compromise. It will be compromise from every party. From mrs. Merkel and from us. This is how europe works. The problem so far as that for five years, europe has been in denial, extending and pretending. They have been putting forward a view of the future which has spectacularly failed to materialize because it was based on faulty logic. What we want to do there is no sense in confrontation. We went to reestablish a modicum of rationality in the discussions. We went to stop this comedy of errors that has characterized the last four or five years and this denial of the crisis in the eurozone. Let me add this, we do not believe that the solution for the greek problem longterm can be accepted by europe or should be accepted if it does not act as a springboard for finding solutions to the problems facing italy, spain portugal, france. It is about time we treated this systematically. The notion that the irish crisis was an irish problem and had to be dealt with independently from the greek crisis, that has come to an end. Europe is getting a chance to turn a page and embrace rationality. A lot of people in europe see it as a great chance. You might be the next finance minister of greece. Have you spoken to him about that . You welcome a chance . You do not expect me to answer this question, do you . This is not for me to comment upon. We have to respect the verdict of the great people. We have to form a government to see if it will be a Coalition Government. It will be up to the Prime Minister to make such decisions. I will not be presumptuous enough to begin speculating on it. What would be the number one thing you would take care of in terms of Structural Reforms . Young entrepreneurs in this country face public enemy number one, the state. There is an onslaught against young entrepreneurs in the form of taxation which is out of kilter and disproportional in terms of the capacity of these entrepreneurs to begin putting greeks back to work. We must do something about that in the first place. Thank you so much. He is a professor of economics at the university of athens. The first word is up next. For our viewers, it is the second hour. We will talk about the u. K. Economy. We will see you in a moment. \ the Main Opposition Party tells us there will be compromise, that there will be no uturn. Oil prices hover around 45 a barrel. The Energy Minister says the opec strategy will not change. The shale producers in the United States will make the first move. U. K. Inflation breaks down to a 15 year low. We will bring you a interview with the u. K. Businessman. Good morning. Good evening to you in asia and a warm welcome to you waking up in the in and states. This is the pulse haircut we are live from london. We are going to begin with the price of oil. It is trading down around 44. We see prices edging up today. Comments out of the United Arab Emirates say the strategy will not change. Saudi wants to crack the u. S. Shale producers. Inflation data has dropped to a 15 year low. He will have to write an open letter to the bank of england and explain why prices are rising so slowly. This is significant. Its very important for the economy. What people want to know is the elections. This is going to hang over investors. Its hanging over everything. We have another general election that comes before that. Its in greece. Let me take you to athens. We have an interview with the finance minister. He told bloomberg that an exit from the euro is not impossible. He was speaking with elliott. He joins us now. You spent about an hour with him yesterday. Talk us through his sense of how things develop. What is he concerned about . He says there is a lot riding on the outcome of this election as far as the Greek Economy is concerned. You would expect him to be stressed. He seems unperturbed by all of these things. There are potential issues with banks. This does not seem to worry him. He thinks even if they renegotiate the debt, which is leading in the polls he does not expect them to do anything crazy if they win. Responsibility transforms whoever runs the country. I assume the rationality will prevail. The question is how quickly. Greece doesnt have much time. There is a deadline of february 28 for finishing with the imf and the European Partners. Whoever runs the government has to have that in mind. The comments we heard from the Economic Advisor with you guys saying there would be compromises in the end. That would seem to reinforce with the finance minister was telling me yesterday. As you were alluding to, he is not a politician. He is not a member of the democracy. He thinks the economy is safer in the current governments hands. Not just because they have more sensible policies and would be less confrontational with the creditors. They may want to ask tweak some of the debt. He thinks because investors know who they are dealing with it will be better for the Greek Economy overall. If we win, the expansion will be huge. The markets will take off. Contracts will be written. Investments will flow. I think we will be surprised positively. If you dont mimic, will that mean investment recession . I cant talk for the opposition. If we dont win, it means delay. At least a month or two. The quicker they managed to come up with a planet, the better off it is for the economy. Uncertainty is the danger that the finance minister sees. We may not be getting away from that. We have to see if a government can be formed. They may have fresh elections. Who knows . I will hand it back to you for now back in london. Thank you so much. Elliott spoke to the finance minister. I am worried that he is not worried. If you are on a political hot potato, you should be worried. You can give the hot potato somebody else. Should greece be in the eurozone . You can tweet us. Hans nichols is here for the day from berlin. Lets talk about what weve learned today and put into the context of 70 who is running a business. The eurozone. Greece, the election. Lets risk lou johnson. Luke, good morning. Do you think we should be paying attention to what happens in the eurozone . Does this have a meaningful impact . I think you have to focus on the things you can control. I dont think individual Business People have much influence over whether greece remains in the euro. They are much work more much more worried about their own microeconomies. Is this something that worries you . Is this something entrepreneurs that about . You have a company. You have a start up and you wanted to work. I think you need to shut down the politics. Given 24 hour news, you can become obsessed about worries on any level. What youve got to do is when you sell goods at a profit, all of the details of running an enterprise. We are getting advice from our guest to turn of the television. For example, the inflation figures are significant. In my business, we are seeing a number of ingredient lines with cost inflation we have not seen for many years. This has an impact on our business. Lets talk about margins. The question is, are you seeing wages paid and reacting to that as well . Are you going to have to pay people more in 2015 . How do margins work . The expectation for pay raises has grown over the last 36 months. I think there are real wage increases in the system. People are moving jobs. If you want to retain the right people, you are going to have to pay the more. This is an arbitrary number how much more to you expect . How much is your wage bill going to go up this year . Two or three years ago, wages were stagnant. They were rising up by 1 . I think this year it will be over 2 . Is there a line . Inevitably most pay once a year. It has a delayed effect because it doesnt come in for a few months. Pay agreements across the board have steadily ticked up over that. I know you have spent a lot of time with the googles of this world and spent a lot of times with entrepreneurs. Given a sense of what they are actually looking at i would like to get a sense. If you look at these last two bigs it big exits, most of that money was focused on the two brothers. The hope is that because of those exits you will have more Angel Investors and seed startups. The ecosystem in berlin will start to take off. I feel like ive been saying that for 16 months. You dont have the critical mass. You dont have a cd of entrepreneurs new money. You have very fierce competition. Its for eyeballs and markets and customers. The goal is to get bought out by the parent. Build a better mousetrap and collect a lot of mice and then hope that the Parent Company comes and buys you out. That is what the tech field in berlin feels like to me right now. What about london . Do we have more money swirling around . I think tax breaks have helped hearing of an crowdfunding is important. Venture capital in the u. K. Was high last year. There has been some successful ipos in the u. K. And the last 18 months. That is helping. There have been trade exit sales. It feels to me as if the environment for technology and entrepreneurship and growth is very positive. It will get better. Unless your programmers have a hard time finding a place to live. Its an expensive city to live in. That is the point that berlin always makes. Its significantly less. You dont have access to the angels. People like london and they want to live here. Now its going to get competitive and ugly. Ive got to get my shots in at some point. If you look at the last 12 months, we can talk about oil and wages. Can we just have a quick scene setter from you. Are there any good outcomes were British Business . I would like to see the new government be probusiness and profree enterprise. That sounds great. Will it happen . We will see. Im not a pollster. I am hopeful that the government that takes over in may is not going to increase regulation. I hope that it is profree markets. If you are a politician and you were in charge and voted on in the spring what would you do first . What would you radically change . Is there anything you would do to benefit entrepreneurs . I think give them credit, this administration has been the most proenterprise one i can remember. They passed new initiatives. One thing they could do better is communicate the tax breaks and other special treatments that startups can get. In general there arent big new initiatives and need to be taken. They need to maintain low Interest Rates. They should continue to reduce the deficit. They should retain a Stable Exchange rate. They need to maintain growth. That involves getting out of the way. Have you enjoyed a Coalition Government . I dont mind which color the politicians are. I want them to be probusiness. I reckon this government has done a pretty good job. Look at the mess they inherited. We have plenty more to discuss. Hans nichols is also back after the break. We will be talking about airbus. The press conference is underway right now. We will be talking to the ceo of airbus later on. That is coming up at 11 30 a. M. Welcome to the pulse. There is a press conference underway for the last half hour. This is what we know. We are in there. Airbus, what are they expecting four 2014 . Better than boeing . We have two things to remember. Airbus is doing better than boeing for 2014 in terms of orders but not better in terms of deliveries. Airbus had 1456 orders. That is better than boeing. The new plane was launched six months ago. They were very happy with the performance in terms of orders for it. It was chosen by delta airlines. You have the success of the plane this going to be delivered in the Fourth Quarter of this year. This is behind me. This was delivered a couple of days before christmas. He has said in a press conference that this was the toughest challenge for airbus this brandnew plane that is 25 more fuel efficient and very modern. The priority is ramping up the production of it. He is aiming at going from three a month to 10 a month in four years time. Thank you very much indeed. You can see the press conference is underway. That is him speaking at the moment. He is the ceo in charge of sales. A little later on we will be talking to his boss. He was speaking earlier about airbus. That interview is coming up here at 1130 a. M. Lets move on to retail. Thank you so much for sticking around. We talked about entrepreneurship and the dangers of the elections and the possible dangers of a greek exit. Talk to us about retailers. The holiday was a difficult time overall. How is the retail landscape going to change . I think there has been a relentless structural shift towards Online Shopping and that will continue remorselessly. There was a time when people thought there might be a limit of 10 to 15 total sales online. That is history. I talked to one clothing retailer said in a brief. Prior to christmas, the sales were 50 online. Thats exceptional. It suggests a trend that isnt going to give up. Hundreds of retail parks are doomed. They are going to have to be demolished. A lot of shopping malls are a waste of space. I think the landscape is going to have to shift. Retailers have to exit useless space and fix their overhead. They will move toward multi channels. Do we understand the best model yet . You are bricks and mortar only . You are online only . Is there a model where you click and collect . Is it going to make the bricks and mortar stand up a little bit longer . Inevitably, each business is different. It depends on its history. It depends on the products it sells. It is very hard for large institutions, longestablished businesses, to reinvent themselves in any industry. Most of the big old School Retailers are finding it very difficult to shift mindset and priorities and change the business model. Its partly cultural. There is no cio sitting on the main board. Most of the Senior Management corrupt when the internet hadnt been invented. They dont understand whats going on. They are trying to play catchup and its very difficult. Retailing is on the front line now. You talk about the tertiary locations like shopping malls. Is there Bank Exposure . Massive. Huge. Its longterm. Its remorseless. As more and more retailers shrink airport wrote folios that is a lot of space thats going to be repurposed. Given we are talking about, partial delivery is where it grows. How could this not have worked . If we are going to digital. That was a business that had a lot of legacy issues. They tried to turn it around. It was a brave effort. Thats what happens with turnarounds, sometimes they dont work. It was a brutal demise. Thats the nature of capitalism. You have creative destruction. That companies have to have phoenix ashes. Will back with luke a little bit later. We will take a break and see you in a couple of minutes. A bloomberg exclusive. The french ambassador from the u. K. Will join us. You dont want to miss that. That will be right after this short break. You can join the conversation on twitter. Hans nichols is here in studio. We are looking to hearing from you. We will take a break and be back in a couple of minutes. We will be joined by the french ambassador to the united kingdom. Welcome back. We are live in london. These are the top headlines. A movement against the islamic nation of germany drew 25,000 people to the streets of dresden last night. That is a record for a monday night rally. The Movement Demands tighter immigration laws. There is a zero pollens tolerance policy for immigrants. Over 100,000 people showed up in berlin, hamburg, dusseldorf grade the 89yearold napolitano met with renzi i am not going to get the italian pronunciation right but francine is. That happened yesterday. The italian papers and been full of this this morning. This could be announced today. Some are saying tomorrow. He said in his new years eve speech he planned to resign soon. He has 89. Air france ceo says that they can expect to see cheaper tickets because of the falling cost of fuel. We spoke to them and was of interview. Do not forget that the dollar is stronger compared to the euro. There are low fuel prices. The industry is a worldwide competition. We will beginning giving a back to the client. That is the ceo of air france speaking to bloomberg. Whats been happening on the financial markets. Lets go to jonathan ferro. This is a demonstration on how link these markets are. Gains in frankfurt are up 6 10 of a percent. In london, where up by half of a percent. I want to take you over to what im talking about, the linkage in global markets. Oil is lower again. The wci contract is below 45 a barrel for the First Time Since 2009. Lower Energy Prices lower food prices. Morrison supermarkets are losing the ceo. This is on the back of a price war. In the u. K. , weve got Energy Prices and lower food prices. Weve got in inflation print today of 0. 5 . What does this mean . Sterling goes lower. This feeds into that lowflation story. Its a global story. This is not just guilt yields going lower. Its switzerland. The u. S. Treasury had their best start to a year since 1998 the consensus for this year is that yields go high. So much consensus, so much uncertainty in the world. Yields go lower. The judgment call for Market Participants is whether to move in these yields a reflection of low growth and low inflation. This could be just a surge of money. Thanks for a much. Jonathan ferro on the markets. Another bloomberg exclusive this is the french ambassador to the united kingdom. Also with this is luke johnson. Thank you so much for joining us, ambassador. We want to move beyond that a little. Can you tell us about the sense of cooperation there is between france and the u. K. In terms of intelligence sharing at this point . Of course. France in the u. K. Have very close relation ships. We are both members of the Security Council and that is very important. There is a French Community in the u. K. Which is about 300,000 people. The british also live in france. We are very close. We are very glad about the show of solidarity that has been shown. The mayor of london and the Prime Minister. Intelligence cooperation is very close. We have meetings quite often. There has been a meeting of interior ministers. We are taking this not public. Very close. From the conversations youve had it, does the u. K. Famine face a similar threat . Is the threat ubiquitous at this point . The statement the only thing that we can say is we are facing the same challenges. These fighters go to syria and iraq. That is about 1000 in france. This is a threat. Our countries are taking the necessary means. We decided to the ploy more policeman. They were protecting monuments and key institutions. The Jewish Community as well. That is very important. Today, that is what we want. There will be thousands of policeman. Soldiers will be employed. This is the first time we have taken measures. What happened is unspeakable. It was so terrible. What can businesses do . We heard from the president and the ambassador. They are deploying 10,000 troops. Is there something the Business Community can do to protect themselves or diminish the threat . I think possibly the biggest threat to the Business Community is not simply terrorism but also Cyber Security. I think this is a very serious issue. Computers asia and is so important. The ability of hackers to wreak damage is significant. If extremists were able to employ the right sort of skills, if they could cause the damage that happened to sony, that could be serious. In terms of disruption to everyday affairs, it can be severe. We will concern Cyber Security. It is crucial of course. Other decisions concerning surveillance and websites especially those that are calling for hatred. The french president is attending the funeral of the three Police Officers killed in the paris attacks. Youre looking at live pictures from that event. We will continue to show you those pictures. It is a heart wrenching day not only for the families and the police, but for the whole of france. That may come back to you. As we look at these pictures we have some comments from angela merkel. She said the world must end in tolerance with the rule of law. There is a political fallout of what we are seeing and the intolerance we may see in europe in the future. The society as a whole needs to address this. We can talk about security measures in place. We can talk about the response we will have to this. There is a series of responses that have developed from what happened in paris. The longerterm story that we see, when you look at Society Changes need to come about. There is going to be a long gestation. How much of it is about security and intelligence sharing . How does society integrate the change to tolerate . Is that conversation part and parcel of the conversation youre having with the people you are talking to . Of course. This is about the protection of people. There should be improvement of the way society has more tolerance. We are to protect all religions and let people practice their religion and their faith. It doesnt work well. We should improve. There should be more done with the muslims in particular. You employ hundreds of thousands of people and you speak to them. When we talk about integration of Society London is a diverse and stable place. Crime levels are at multiyear lows. Thats a broadbrush thing. I think business has a role of creating jobs and opportunities and attracting investment. In embracing everyone into the workplace. What people want is a good job. If they can get that, they are much less likely to fall into a life of crime or extremism. They wont believe the nonsense spouted by religious maniacs. If you have a stake in society you are working and you have a home, youre not likely to commit murderous acts. I think a Healthy Society has not extreme levels of unemployment but is a prosperous one. Prosperity is the key to more acceptance of others. We will talk more about Cyber Security. Up ahead, 2015 good be the year that cyberattacks go mainstream. Weve got all the details on the hack job we have seen overnight emerging. This is from the u. S. Central command. The military is being hacked. We will talk about that when we come back. Welcome back. Were live from london on the television. The nets states Central Command has been hacked. Hans nichols is here with more. Lou johnson has been talking about hacking and threats to business. Lets talk about the story. Another hack attack. This is close to the central power. This is based in tampa florida. They do all the commandandcontrol in the middle east. A group is a sushi and with isis took over the twitter account for 30 or 40 minutes. The white house is saying that its a prank. This was not a serious threat. Everybody has to be vigilant. Even your twitter account needs to be guarded. That goes for businesses as well. The onslaught, the extent of the number of attacks is appling. Its an embarrassment. You are the most powerful country in the world. This is Sensitive Information it, even if nothing leaked. You never want to give the enemy propaganda opportunity did we are talking about it. The government did not have a verified account. It didnt have that blue check. That is the bit that fascinates me. We were talking to luke about the level of understanding of senior guys in the military, business everywhere about technological threats. You would think that with the ability of the nsa to see every ring that they would understand the threat. We are in a world where weve got a bunch of guys in their 60s running big operations who did not grow up in the internet age. When you look at your businesses, how much of what they are doing is inexact . The people running the business dont have the right level of technical knowledge. We are not doing what we should be doing because we are not listening to the guys that do. Virtually no Large Company i know except a Technology Business where the cto is the boss. That is a weakness in most boardrooms. The chief Technology Officer is not around the table. You wont have the technology represented. Im not sure a 30yearold would have the digital savviness of the people use it. Its 20 earls . 20yearolds . You shouldnt be to a just about it. They dont tend to go to the boardroom. I think on every board agenda now as well as by law, you have to have health and safety as an item. You should require half of the board to where cities. Then we know it would be organic. You do see a lot of ceos that are trailed around by a 26 your old talking social media. A lot of times, they dont know what theyre talking about. The 26 your old. They are convincing the ceo that we are social because i have a twitter feed. There has to be a balance. You cant just bring in a bunch of kid in hoodies. I thought you were the kid in the hoodie. When you sit down at your company, is that chief technology guy there . What would you say the average age is . They are in their 30s more than in their 40s or 20s on average. This sort of talent is scarce. Things change. All these businesses are going to have technology at the core. The most Successful Company has been technology companies. Are we going to see more startups and more entrepreneurs working on Cyber Security in the u k . I dont think its over by any means. Thanks to our Defense Industry we are good at Cyber Security. I have a home where they invented radar. They have a network of Cyber Security companies in that area. Thanks to that Defense Technology background, many of the companies are small, but they are pioneering and innovative. I dont think the race is lost it all. It will create opportunities for enterprise minded evil. Was radar or sonar more important . X youve got me there. You finally stumped our guest. Thank you so much. Thank you for joining us for the entire hour. He just ponders the difference between sonar and radar. We will go to a quick break and then we will get the answer from hot singles. The a tangle italian president is expected to step down soon. It could be today. We will talk with the airbus ceo. We have plenty more on the way. Will come back to the polls. But me start off with an interview that will pick lace in 35 minutes. That will be with the ceo of airbus. Big challenges for him this year. They are ramping up production of the new aircraft launched on the company. They are trying to sell a few more. Those are the big two issues we will be looking at. We will have a live interview. I am looking at the jobs panel. The italian president is said to step down in the next couple of days. He has been in power for nine years. This is a largely ceremonial role except he carved out a place as the keeper of the goodness of italy. The put renzi in place. It used to be a ceremonial role. He has done well. I put on my white house course on the tat. Had likely that this mess about not sending unofficial to the paris march. Eric holder was in town. He did not attend. The u. S. Has egg on its face. We heard about security concerns. If youre not going to send obama we should be looking at cyber companies. The number two at the handgun is starting up his business. I am looking forward to the interview in half an hour. We will take a break and then take you over to our team in new york. They will run the show for the next half hour and then we will come back. He is coming up here on bloomberg television. See shortly. This morning, i continued flight to cloudy. Global ramifications of a true collapse in oil. The president needs to agree to. There will be pipelines of politeness and wall street goes in search of charity for benevolence. Good morning, this is bloomberg surveillance. We are live from our World Headquarters in new york. It is tuesday, january 13. I am tom keene with Olivia Sterns and brendan greeley. Another day, another big drop in oil prices. Crude got more than 3 . West texas intermediate fell below 45 a barrel. Brent has been trading for a little less than four to six dollars per barrel. The latest pressure on prices comes from the uae. The oil minister says they will stand by its plan to expand output capacity. The uks inflationary has fallen to its lowest level in a most 15 years. Consumer prices rose an annual rate of just 1. 5 in december for the first time that will require the bank of england governor to write an open letter explaining why prices are rising