Transcripts For BLOOMBERG The Pulse 20150209

We are here in london. Im guy johnson. Lets turn to russia. In her first interview with an international broadcaster, the head of the central bank has told bloomberg that bank of russia is not an arm of the kremlin. Elvira nabiullina has been criticized for the rubles collapse. Ryan chilcote began by asking her whether the ruble will tumble again. We are of course not expecting any massive decrease in the rubles exchange rate, because the decline in the oil price was the third biggest in the last four years and the amount of external debt that has to be paid this year is about one third less than last year. Year on year inflation, could it go beyond 20 . Inflation may be higher than the current 15 , but this higher level is driven by past taxes. Moreover, id like to point out that other inflationary factors [indiscernible] we expect a contraction in Economic Activity and demand. On top of that, we have money supply data. Thats why we expect inflation to slow down in the Second Quarter, after the Second Quarter, in the second half of the year, and into 2016. Thats why there is no reason to talk about the inevitability of a rate increase. When do you see lowering rates . We will make the decision on rates based on our analysis of the situation in the economy our forecast on economic development, and on the dynamics of inflation. Analyzing the entire balance of risk, inflationary risk and Financial Stability we will make a decision that is consistent with our task of reducing inflation within the framework of our targeting, and achieving a level in the midterm. When you lowered rates from 17 to 15 , you surprised almost everybody. The conversation began, how independent is Russias Central Bank . Are you independent . When we made the decision on cutting rates, we didnt do it at the expense of inflation. We based it on our forecast for inflation and Economic Growth. Of course, there is a lot of criticism of the central bank, but the bank of russia is used to criticism. There are Interest Groups in the economy. Some gain from a week ruble, others gain from a strong ruble. The central bank has been criticized on all sides, so we are used to it. Are you independent . We are independent. Right. Lets talk to Ryan Chilcote. I didnt see any strings on the video. Is she really being manipulated . I didnt see Vladimir Putin anywhere and she didnt take any phone calls through the interview. Look, i think anytime you have such an abrupt policy reversal people are calling this one of the most abrupt reversals in a quarter century by any central bank you are going to be questioned. Particularly if you take a specific look at russia, theyve been raising rates since 2011. Elvira nabiullina has been there since 2013 almost triple rates in 2014. We had that massive 650point rise in december. Just before she reduced rates, she said she would have to see a sustainable trend in deceleration of inflation before she cut rates. And then, what does she do . She cuts rates. I think what she was doing in this interview is saying, there are some things yes, inflation is going up, but there are some things you dont know about inflation that i know that give us the sort of logic for this rate cut. Im putting an economics hat on. If she is going to lower rates that makes the currency less attractive, which leads to the assumption of imported inflation. Did she give any explanation for her thinking surrounding the inflation story . Her idea is rates go up continue to go up through the first half of the Second Quarter, and then begin to fall. And inflation begins to fall in the second half of the year and right through next year. The big jump we got in inflation , this is a massive jump. Month on month, between december and january, it went up nearly 4 . Oil prices went down though. Theres an argument, and what she says is, of course. Inflation was created by this collapse in the oil price thirdbiggest in 40 years, so we are not going to get another one of those. We are not going to have that kind of pressure on the ruble. She also talks about payments and debt. She says in 2015 thats going to be one third less than it was in 2014. She thinks inflation is going to continue to fall. Well, first rise for the next couple of months, then start to fall. And for that reason its ok to cut rates. She also said, she doesnt see any case for raising rates. The market expects more rate cuts. Ryan, thank you very much. You will be back later on. I want to find out more about her. She is a fascinating woman. Ryan chilcote, great interview. Lets move on. The Russian Central Bank has been behind an awful lot of gold recently. Lets talk about gold. Rebounding a touch this morning. The greek Prime Minister elect once more projects his countrys bailout. Geopolitical tension and deflation stock the global economy. Lets talk about it from a gold miners perspective. Joining us from cape town is ran golds ceo, mark bristow. Good morning. Good morning, guy. Weve got so many moving parts at the moment. Gold kind of hasnt fared well of late. When you look at the geopolitical story, when you look at what is happening in russia, when you look at what is happening in europe, how do you put it all together and relate it back to your business . You know guy, weve discussed this on bloomberg many times now. If you try to position your business within all the data of the global economy, you will get very confused very quickly. Our focus has always been to deliver longterm value and exploit the peaks and ride through the troughs of the gold. Our results today reinforce that. We had a solid set of results. We had to place the gold we mind , and we grew our cash which puts us in a very strong position. So thats the first party your question. The second is, the last time we had real stability in the world was in the late 1990s. Today, the dynamics are very, very complex. As weve seen, the quantitative easing and all the promises and opinions and forecasts, none of them have really come to fruition. People, at the end of the day, need to pinch that risk in the market with some sort of currency that politicians cant print. And you think that carries on being the case . Despite the fact that weve had qe gold has gone down. You would have thought that would be counterintuitive. You print more money, you would have thought the value of the asset would go up. Very hard to predict pricing Going Forward from here. Your reserve pricing, around 1000, do you think thats a reasonable number or you should be thinking about a week or number . At the current gold price the industry is bust. Our view is that something below that certainly secures your ability to manage through the trough. The fundamentals i think the industry exercised some discipline in being able to just produce gold that made a profit. We will find that the gold prices go up higher very quickly. The market is very robust. Despite all the predictions of much lower gold prices, the gold price has stayed up. A lot of people arent pricing at 1000. They are pricing higher than that. As you say, the industries industrys demand is there. You talk about m a being an opportunity story. Is there a line in the sand that you watch for, that you say, we can pull the trigger now on making the is yields on making these deals work . Give us a sense of what the levels look like. We look for in a minimum of 3 million that can make a 20 return at 1000. In times like this, if you go back to when we started brand gold back in the mid90s, we had a very similar situation. The big guys then are the smaller guys today. The new companies on the block really created some significant value and delivered some really fantastic companies during a time when the traditional big guys struggled. In these sort of times, it is always where opportunity arises. We are clear about what we are looking for and what we saw in todays results is, weve always been organically driven as far as creating our own production through discovery, but there are times in the market where m a opportunity does arise and youve got to be ready table the trigger. Any targets insight at the moment . How many assets deliver the 1000 20 story for you . In the whole industry, about 12 to 15 assets that would pass that test. You can imagine the industry tries to hold on to its best assets. At the same time, the industry is over geared and needs to be able to unwind their gearing. Right now, certainly toward the end of last year, we saw everyone wanting to sell assets they would like to sell. What we are looking for is to watch the industry, to realize the industry itself has to reinvent itself, and it has to deal with those decisions of selling some of the assets they have to sell to address longterm viability. Thats the opportunity that we are looking out for. Mark, we look forward to hearing from you when those opportunities come to fruition. Thank you very much indeed. Mark bristow, ceo of rand gold. Coming up, not backing down. The greek Prime Minister has rejected the eu Bailout Program again. What is his plan . We are going live to athens after the break to find out. Good morning. You are watching the pulse. We are live on bloomberg tv. We are also on your mobile phone. Degrees now, where the Prime Minister has reaffirmed his rejection of the Bailout Program. He did so in a speech to Parliament Last night. Tsipras tone sets the stage for a confrontation. For more, lets go to athens. Marcus, the man is not returning. We think we know what the objective is. Is there any sense of a change at all here . His speech yesterday was very much a case of reiterating what he said on the campaign trail. His message was, i wasnt just saying this stuff to get elected. This is our program. You can detect small changes. One thing is the debt restructuring. He didnt spend a lot of time focusing on this point. The other thing, although he said he will increase minimum wage to 751 euros a month clearly there was talk of this happening eminently whereas now [indiscernible] his speech is very much setting out a plan. The question is when they would implement a lot of this stuff. Now, what they are doing is trying to put numbers to all of this. They dont have a lot of time before the money runs out. Officials saying, you have to ask for a bailout extension unless you come up with a complete plan. Thats what they are trying to do right now ahead of the meeting in a couple days. Thats something that needs to be done in a hurry. What is next . Well, we will see later on at the meeting. The key thing is to see whether or not it is accepted. A key redline on both sides, and this could be a big collision point, is that euro area officials are saying you have to have an extension if you want more time. From greeces point of view, they are saying, we reject this bailout completely. If we accept an extension to the current bailout as opposed to a Bridge Program that will give us time to develop something more concrete that would be what we reject. So a lot will come down to how this major disagreement is resolved. Marcus, thank you very much indeed. Lets get more on greece. Lets get a german view. We should probably talk about ukraine as well. Joining us now from germany is michael fuchs, deputy chairman of Angela Merkels party the Christian Democratic Union. Michael, good morning. The greek people have rejected the status quo. I think that is fair to say. Is say riese syriza correct in listening to them . First of all, he can listen to them but he also has to listen to the contracts which his predecessor has signed. We have a clear agreement with greece and one of the agreements is that all the loans everything is under certain conditions. These conditionalitys, greece has to follow. Theres no way out because all the contracts be it ecb or imf or eu all are under certain conditions. These conditions have to be fulfilled. Very straightforward. Are you hearing anything . The language coming from athens is fairly clear. Are you hearing anything about back channels or the possibility of a change in tone . Are you hearing anything in the speeches that would suggest there is a possibility of these contracts being honored . There wasnt much. I remember very well the speech of the german finance minister after he met mr. Verify chris last week mr. Varoufakis last week. He said, we only agree that we disagree. We have a full disagreement at the moment. What they have to do was the contentions the reasons why we gave them credit. Theres no free life, theres no free lunch, and we have to work it out. Michael, if there is no agreement, does greece leave . Actually, it is up to the greek people. I dont want greece to leave the eu and and neither the eurozone. By the end of february, there is a final moment. There will be no fresh money coming to greece anymore. What they have to do is see whether they are capable to do it by themselves, or whatever other method they have. Maybe they are able to collect more taxes. I cannot tell you. This is up to mr. Tsipras and his team. If greece say the only way to get rid of the pressure is to step out of eurozone, it is up to them. We have prepared for this moment. Ok. On that note, im going to leave it. Great pleasure speaking with you. It is a very busy morning. Michael fuchs joining us, a key advisor to Angela Merkels Christian Democratic Union from germany. We are going to take a break. Back in a couple minutes. The conversation will continue. Welcome back. You are watching the pulse. Im guy johnson and these are the Bloomberg Top headlines. The governor of Russias Central Bank has told bloomberg that it is unlikely to reverse last months surprise rate cut. In her first interview with an international broadcaster, Elvira Nabiullina also said the bank of russia will stick to its pledge to avoid currency intervention unless the swings threaten Financial Stability. Greeces Prime Minister has reaffirmed his governments reelection of the countrys international Bailout Program. In a speech to greek parliament, greeks tsipras promised to restore tax thresholds and halt privatizations. His speech came just before an emergency meeting with eu finance ministers. The new contract between greece and europe which will be reflected in a midterm plan for National Reconstruction, will not condemn the Greek Economy to an internal recession with conditions for irrational and unreal primary surpluses which is another name for austerity. Hsbcs Private Banking unit made profits by handling secret accounts of criminals according to a report. The report by the International Consortium of investigative journalists reveals how back in 2007, the bank controlled assets for clients including convicted cocaine dealers and terror suspects. Hsbc promoted accounts as a way to hide profits from tax collectors. Hsbc set its efforts had been inefficient and it now enforces far more stringent requirements. Finance leaders from the group of the 20 largest economies are meeting in istanbul to focus on policies that could help revive a struggling global economy. Lets go live to istanbul. Paul gordon is standing by. Ahead of this meeting, what are we expecting . Finance ministers have got so much to think about right now, from geopolitical risk to the problem of deflation. What is on their minds . Theres a lot to talk about. There are some interesting talks going on at the moment. We have a copy of the draft communique and that tells you that the overriding concern of the moment is that Central Banks around the world should not move too fast to start tightening Monetary Policy and raising rates. We have seen banks cutting rates at the start of this year. The big one to watch for is the u. S. Federal reserve. Similar case for the bank of england. The draft communique says the risks are out there, deflation risks are out there, and Central Banks monetary policies should be capped accommodative until the economy has the growth in place to withstand the cost of doing that. That is on the minds of centralbank heads. Finance ministers as we speak. Lets talk about carney a little more. Talking about the idea that the u. K. Is on the right path, that theyve been clear on inflation, read between the lines for us. What did he have to say . Well, the issue here, this is at a conference being held related to the g20 but in a different venue. He was saying that, yes, the bank of england has been transparent on inflation, has been consistent on inflation. The issue at the moment is the tumbling oil prices. Inflation is a long way short of the mandate. Likely to fall even further than that. He said he will have an exchange of letters with George Osborne and explain how he will get back to the inflation goal of 2 . He also said that in the economy more broadly, we are starting to see turns in the wage path. People are starting to earn more and the economy is on a relatively solid footing. He was last alleged about productivity. Less bullish about productivity. Paul, thank you very much indeed. Paul gordon joining us from istanbul. We will have those letters and the details later on this week. Lots of coverage coming up. It has been another interesting day for the Banking Sector. Ubs foreigncurrency structured products are being investigated by the u. S. Justice department. Hsbc is caught in the crosshairs as well. Secret accounts at hsbc have been unveiled and they apparently held money from criminals. Its a difficult story for hsbc to handle. They thought theyd put this behind, but once again, back in the spotlight. Lets try to draw some lines between all this. Caroline hyde has been tracking the story. It goes back eight years. This was uncovered by the International Consortium of investigative journalists. They have accounts associated with 100,000 people across 200 countries and they are quite sensational. Understatement. Cocaine dealers. Terror suspects. Arms dealers. Even david bowie in there as well. The issue is that theyve significantly benefited from handling secret accounts for an array of criminals. This comes as very bad pr for hsbc. They have put out statements saying, weve undergone a radical transformation since 2007. Theyve enforced far more stringent reporting requirements and have numerous initiatives to move on from this. Once again, very bad headlines in front of the press. Clearly a concern. Politicians are in front of this one again. Lets talk about ubs. On friday, there was a story that we ran with investigation over helping americans evade taxes, using what is known as bearer securities. This is after they issued settled one issue years ago. Today news that the investigation into foreigncurrency manipulation basically, this is another area of money that potentially they misled clients. The crucial issue is here, what commissions are these banks being paid and did the bankers stand by their legal duty . Thats another investigation. Caroline, stay there for a moment. Two banks suffering reputation blows again. Another is launching a venture in hopes that it will boost its image. Rbs is repressing space for entrepreneurs. Repurpose thing space for entrepreneurs. Alison rose is the royal bank of scotland ceo for commercial and Private Banking. She will be at the launch later today. She joins us now. Heading off shortly. Nice to see you now. There are many ways of looking at this. One of them is reputation. This is presumably designed to give your business a decent reputation boost. It looks good on paper. How is it going to work . One of the key parts of our strategy is helping small businesses. Particularly, entrepreneurs. It is a really difficult start when you get going, when you have an idea of getting a business going. We can really help companies and entrepreneurs in their strategy. We have been working with startups in scotland in an accelerator hub which has supported lots of entrepreneurs in getting going, giving free advice, giving mentoring, giving space to work in. They dont have to be customers of the bank. If you help those entrepreneurs get going and support the survival of entrepreneurs, that is real stimulus to the u. K. Economy. You are helping people get jobs. Having seen the success weve had in scotland, we are looking at rolling that out across the rest of the u. K. Im supporting the opening of eight new accelerator hubs. The rest will roll out over the next 80 months. Where are you looking at . It is interesting that you are not launching one in london. This is about the rest of the united kingdom. Exactly. There are huge Business Opportunities and huge innovation happening outside of london. Often, we center on london too much. We are all over the u. K. If you look at where accelerators are starting that is where we are going. Germany was the first place. They have the highest number of entrepreneurs and startup companies. We want to support them. The other will be bristol later this year. Again, entrepreneurs, small businesses, this is where we can help them. Interesting, you are automatically lending to these businesses. Rbs has said, if we cant lend to a business, we will suggest alternative means of finance. Will you hope to lend to all these businesses that do well . I hope as these businesses become financeready because in the early part, they cant support debt and they are not generating cash flow. This is about helping them with how to run a business plan, cash flow, thats where a lot of these new businesses struggle. They might have a great idea but how to make it real . We are putting money behind this to help them get that marketing director or a new product on their line. A lot of them arent bank ready. What we are helping them do is get ready and trained to become finance ready, find different funding so it is really not about generating new customers for us. It is about hopefully getting more customers in the future. When these companies are really successful, it would be great if they become customers of ours but thats not a criteria. Is the nature of banking changing in this country . When you look at the nature of banking pre2007, it is very different from now. As caroline says, the peertopeer stuff, that is an interesting way of looking at it. You are talking about setting up accelerators. When you think two years down the road, what are you going to be doing then . For us, it is really about making finance available where we can, but safely. Lets give really good advice. For a lot of companies, they can get financing. I see our role as a bank as not just supporting the customers that we can lend to today, but theres a whole lifecycle. If we can be part of that network and ecosystem and Work Together with other lenders and funders, thats a really healthy thing to do. I think thats the difference. What is it at the moment that is holding the Banking Sector, Holding Small Companies Back . Theres a lot of research by Goldman Sachs that suggests bank credit is one of the main problems. In your eyes, is that the case . Is that something we should be doing more about . What is it thats Holding Businesses back . This revision of credit is really important to getting business is going. We are putting more credit into companies and small businesses. We have issued over 300,000 the companys and offered 12 billion in financing to get them going. It is really about educating companies on what you should be thinking about. Can we generate cash flow to repay debt that is not often the only source of financing. I think thats a really important aspect, educating entrepreneurs supporting them and helping them get on the path to sustainable business. That is the broader role that banks have to play. Thank you very much indeed and congratulations. Alison rose ceo of commercial and Private Banking at royal bank of scotland. Caroline hyde. Back a little bit later. The film industrys biggest night out, and bloomberg was there. We will have highlights when we return. Welcome back. You are watching the pulse. Terra firma is changing its approach to investment. The group is putting one billion euros of capital into future deals. That is according to a report by the financial times. The move is an attempt to restore its reputation, which was hurt by the debt heavy emi takeover in 2007. Greeces exit from the eurozone is just a matter of time, because no one wants to risk lending money to the country. That is according to alan greenspan. He spoke in a radio interview with the bbc on sunday. He said the crisis cannot be resolved as long as it remains in a single currency. Greeces debt stands at 320 billion euros 175 of gdp. Microsoft is looking to africa for growth. The company is targeting the continent with sales of mobile phones and computers that run on its operating system. It is part of a push to capitalize on demand for handsets, as africa is growing its market faster than anywhere in the world. Now, the baftas, the biggest event of the british film character calendar were held last night. The big winners were Eddie Redmayne and boyhood. We spoke to the team behind the lego movie. We didnt make it as a toy commercial, but we wanted to honor what was so special about the different ways people can play with the toy and how it is a tool for creativity. It is a fun bonus that it helps move that into the number one toy company in the world. Bloomberg also caught up with the best supporting actor winner, jk simmons, before the ceremony. We asked how it felt to be part of a film that did so well. This was the awardwinning whiplash congo whiplash, a film that was made in under 20 days of shooting. He did an absolutely brilliant job. Im so delighted that he was nominated here as best director. Coming up, how low can commodities go . We look at the impact of fiveyear lows on investment in some of the most resourcerich companies. That will be straight from the big mining conference in cape town today. Stay tuned for that. Coming up right here on the pulse. Good morning. Welcome back. You are watching the pulse. We all live on bloomberg tv. I just want to point out to you that the greek markets are remaining under considerable pressure this morning. Bonds are trading higher in terms of yield, prices lower. That is the composite index, the athens composite share index down by nearly 5 this morning. The banks are leading the charge lower. Youve got euro bank down nearly 9 . Alpha bank down nearly 9 . National bank of greece down 7. 5 . We are seeing a great deal of pressure being put on this market right now. This as a result, some would say, over a speech delivered by mr. Tsipras ahead of this critical meeting coming up between greece and the rest of the eurogroup. What kind of meeting will that be . Michael fuchs, very close to Angela Merkel, speaking to us earlier in this program, making it clear that greece must stick to its existing obligations. What happens next is the question that everybody is asking themselves at the moment. The pressure certainly being put on greece to make a change. Tsipras, varoufakis not taking that pressure at the moment. Lets talk about the context of a different way of looking at it. Geopolitical tensions lower Commodity Prices. All themes that we expect will be running through a mining conference in south africa this week. The investing in African Mining conference. What does this have to do with that conference . Lets talk to one of the conferences attendees. Good morning to you. What are people talking about . What do you think people are going to be talking about at this conference . Commodity prices are being crushed. There doesnt seem to be much global growth. The u. S. Is driving the dollar higher. What are the themes people are focusing on . Today there is a gathering of all the investors in mining in africa. You have international companies, private investors, private equity groups and there is a high interest to see if this is the right time to enter into the Minerals Market in south africa. Prices are not high. But maybe this is the right time to invest in africa. When you look at the risks that exist around the world, what do they look like to you . Weve got big meetings relating to russia. You were a man that spent a lot of time in your previous job dealing with russia. Weve got the issue of greece. Walk us through how you see the landscape and where the big risks lie. Of course, greece is a major problem. It has not been solved yet. Ive seen declarations made by the greek government today and im expecting to find a common position is not going to be easy. There is a lot of nervousness in the market. As far as russia is concerned, i continue to be fairly optimistic. I dont think that our world can afford a confrontation with russia for a longterm. We are all expecting to see what happens tomorrow in minsk, in the meeting between Angela Merkel, hollande, who tim, and poroshenko. Let us hope this will stop the process of confrontation between the restaurant world the restaurantwestern world and russia. Your views are always welcome. Paolo scaroni, he is deputy chairman at rothschild. When we come back, we will carry on the conversation. What is happening in minsk . A critical week for ukraine. We will talk about that when we come back. In an exclusive interview, the Russian Central Bank governor says the institution is independent of the kremlin. Greeces Prime Minister says he will end austerity. Banking on secrecy. A report alleges hsbc has an account for criminals. Good morning to our viewers in europe. Good evening to those in asia. A warm welcome to those waking up in the United States. This is the pulse. Lets go to greece. The Prime Minister is reaffirming his rejection of the Bailout Program. His defiant tone sets the stage for a confrontation. His finance minister will need his counterparts in brussels on wednesday. What did we get from the speech . What was the goal he was laying out . In the days leading up to the speech there has been a lot of digging in. What we got out of the speech was the digging in. The main message was that all of these Campaign Promises that we made they were not just words. This is our program, this is what we want to do. The one area where you can detect some backtracking was on the debt relief which he addressed, but quite briefly without getting into much detail. The overriding message right now was that both sides are digging in further. You wonder what is going on behind closed doors whether there is actually some movement. I guess the big question is, how does it work . This is exactly what they have to calculate. The big red line for both sides is the issue of the bailout extension. Greece said at one time that they do not want to extend the Bailout Program because they reject the bailout and they cannot possibly accept any kind of continuation. They want to Bridge Program instead. The euro area said, fine, show was your plan. This is what the greeks are trying to do. They are trying to put numbers to all of this so that they can present the complete plan to the euro area at the meeting. It is going to be an interesting week. What an interesting week it is for greece. Thank you for your help, marcus. Lets quickly check in on what we have coming up on the greek market. Post that speech, we are not back at lowes, but we are getting there back at lows but we are getting there. We are going to talk to mark walker later. When this private sector involvement took place in greece, he worked with various people he will be joining us later in the program. This morning, the Market Reaction is fairly unequivocal. We are getting back to the lows. The equity is down. That is the athenian composite. The big banks are taking it and taking it hard. Alpha bank is down. The euro bank is down. Money is flowing out of them. It is more than a trickle. That is a key cause for concern. The yields are popping again. The frontend of the greek curve is moving around quite strongly this morning. You have yields rising. That is something that is going to worry investors as they watch this story developed. Where does the money come from . That is the big story in greece. That is one of the focuses we will be spending a lot of time talking about this week. The other one is russia. Lets turn back to russia. It is her first interview with an international broadcaster. The head of the countrys centralbank talking to bloomberg, telling us that the central bank is not an extension of the kremlin. She has been criticized for the rubles collapse. Some say she has been extending the story of the kremlin by cutting rates recently. Ryan chilcote went to russia and sat down with her and begin by asking whether the ruble can tumble again. We are not expending any kind of massive decrease in the rubles exchange rate. The amount of external debt that has to be paid this year is about a third less than last year. Year on year inflation, could it go beyond 20 . Inflation may be higher than the currency. These high levels of inflation are joined by taxes. Moreover, i would like to point out that other inflation will subside. The contraction in Economic Activity and a contraction in demand. On top of that, we have moderate [indiscernible] that is why we expect inflation to slow down after the Second Quarter in the second half of the year, and in 2016. That is whether is no reason to talk about the inevitability of a rate increase. When do you see lowering rates . We will make the decision on rates based on our analysis of the situation in the economy our focus on the economys development, and on the dynamics of inflation. We want to look at the entire balance of risk. We will make a decision that is consistent with our task of reducing inflation within the framework of our inflation targeting and achieving a level in the main term. Mean term. When you lowered rates from 17 to 15 , you surprised a most everybody. The conversation began, how independent is russias centralbank . Are you an arm of the kremlin . When we made the decision on cutting rates, we did not do it at the expense of inflation. [indiscernible] we based it on our forecast for inflation and Economic Growth. Of course, there is a lot of criticism of the centralbank. The bank of russia is very used to criticism. There are various groups that gain from a week ruble and those they gain from a strong ruble. We are used to it. Are you independent . We are independent. And nice little way to finish a there. Ryan chilcote is with me now. She did not get any phone calls from the boss during the interview. He says he is not the boss. Were talking about Vladimir Putin. That rate cut got a lot of people talking about whether this was putin picking up the phone. Sure. It was one of the biggest policy reversals that anybody has seen at a central bank in a quarter century. Russia has been raising rates since 2011 and she nearly tripled rates herself in 2014. She raised them 650 basis points in december. She had just been saying a few days before she reduced rates that she did not see grounds to reduce rates until she saw a sustainable trend that inflation was slowing down. What was it over those nine days if not the pressure that was being put on her by people who said that business was dead with rates at 17 . I think that her response to that is no, im independent. I made this decision because inflation is at 15 and it is going to continue to go up but it is also going to go down in the latter half of the Second Quarter and into 2016. So i guess the real answer as to whether she is independent and whether she is doing a good job at running the central bank is when we see the inflation figures for the second half of the year. Was it really ok to lower rates . Having said that, the key rate is still 15 . It is not like she went to a negative deposit rate or something. Talk to me about her. I remember when she first got the job and everybody said she was very close to putin. Put her in context of the russia story. Where does she fit in in the universe . She is a very interesting lady. I was very interested in meeting her. She was the russian president s economic aid for years. She was in the ministry of the economy. She comes from that background. She is clearly part of the liberal camp, if you will. She identified holder as someone she would like to emulate paul volger as someone she would like to emulate. The fact that she worked with the russian president definitely feeds into the has he been calling the shots behind the scene . When you think about how the kremlin works, lets take her at her word that she is independent, but if you imagine the russian political elites it is best to think of Vladimir Putin as a ceo. It is not a monolithic structure. Im sure she is hearing various voices as well over at the central bank. Well, i know that she does have a great deal of influence within the russian political elite within the russian business community, and in the kremlin, as well. Whether she is the final voice i guess that is open to debate as we have seen. No one doubts or academic credentials. There was an awful lot of criticism of the speed with which the russian centralbank reacted or failed to react to the rubles collapse and how they have handled the situation with the currency this year. That is often the criticism leveled at central bankers. I think, what she did in this interview was that she said, no here is the logic be kind behind what i have done. That was her First International broadcast interview . Thats right. She does not do a whole lot of chatting with international journalists. Ok. And she talked to you. Ryan chilcote, thank you very much indeed. I had, we are going to move the conversation on russia to ukraine. Leaders are continuing talks to find a resolution in that country. We will break it down after the break. Good morning. Welcome back. Leaders agree to chat with talks on ending the ukrainian conflicts. That includes a tended of peace summit to be held in minsk. That meeting could determine whether a Peace Agreement will take cold. Hold. Good morning. We have this big meeting coming up. Can you put it in context . People are talking about it being a make or break. I dont think that is an exaggeration. The last peace deal in minsk was signed by b players and c players. The relevant heads of state are getting together in minsk now. Now, will it stick . Lets deal with what you think the deal will look like. What do you think the structure will be . It is going to hinge on the withdrawal of the heavy weapons the artillery, the multiple rocket launchers. This is what is killing people every day. In appalling numbers. If you withdraw that off the frontline which is also contentious about where it is if you withdraw it disputes of 23 kilometers become less important. Francois hollande leaks to the media that they may be looking at it Demilitarized Zone of 5060 meters. That is the key. Once you have done that it is difficult for the holder to go on. You simply cant kill dozens and dozens of innocent civilians every day that way. That is the key. It is the withdrawing of heavy weapons that is the single most important driver. Lets say that happens and we get a deal and implementation and heavy weapon withdrawals taking place. A frozen conflict is the best we can hope for. Thats right . I would agree with that. That is the most plausible realistic scenario. That is not to the taste of the Ukrainian Government or the United States government. I think that pure humanitarian imperative will make it politically possible to get to that frozen conflict staging post. Of course, the doctrine will be that that is nearly a staging post for continuing work on substantial conflict resolution to do with reaffirming ukraines sovereignty over the whole territory of ukraine but with autonomy for these areas of the country that fear and distrust the people in power in kiev, the control of the border between russia and ukraine, all the other agenda items. I would agree with you that it looks like a frozen conflict. That is a whole lot better than where we are coming from already. Markets have priced in some fairly negative outcomes. If we were to get a deal this week, if you are an investor in russian assets, how should you view this week of the subsequent weeks to follow . It all depends on the risk appetite. Of course, conservatism would be more than just a side. How can you be confident that someone will stick when just a piece of paper is signed . If it does not stick if youre exposed to russian assets, you have the risk of more sanctions escalation, the total interdiction of the russian Capital Market it is delisting from all benchmark indices, attacking sovereign bonds, attacking the bank. All those risks will remain out there. However, the frozen conflict scenario is one that would see the high tide of the crisis being reached. It may be a long time before any sanctions are lifted. Nevertheless, it is very difficult politically to imagine all of those risks actually materializing if the shooting war has stopped. That of course, is very bullish. Four russian and ukrainian assets. That, of course is a very bullish scenario four russian and ukrainian assets. They need to be paying attention to heavy weapons being taken out. These are the key drivers for asset prices. You will get into security stuff about monetary missions, peacekeeping and all the rest of it. Just one final question. You talk about the economy of ukraine. Ukrainian assets. What needs to happen post a peace accord in minsk, how much money will it take . What do you think is the appetite for serious support of the ukrainian economy . It does not seem to be sufficient from the ukraines western government supporters. There have been some commitments. We are talking 2 billion, 4 billion. It is not enough. Russias involvement will be important in all sorts of ways. That is another very important practical side of the conflict resolution that russia becomes part of the solution rather being part of the problem rather than being part of the problem. That is a potential driver out there. Thank you indeed. Christopher granville joining us from trusted sources. Greece and the eu seem as far apart as ever. We are talking about greece. There is a link between greece and the ukraine with the russian angle. We will talk about that. Stay tuned for that conversation coming up. Welcome back. You are watching the pulse. The u. S. Justice department is investigating ubs. It is part of a wider probe into manipulation in the fx market. Tony abbott has forced a leadership challenge. The vote weekend tony abbotts position. But he defeated the challenge. Imports plunged the most in five years on falling Commodity Prices and weak domestic demand in china. It complicates the chinese governments management of exchange rates. We are going to take a break. After that, more on russia and its central bank. O these are the bloomberg the pulse. Inflation is set to slow in russia. The bank of russia will stick to its plan to avoid currency intervention unless the ruble swings toward financial instability. Greeces Prime Minister has reaffirmed his governments rejected his governments rejection of the Bailout Program from the eurozone. His speech comes two days before an emergency meeting with eu finance ministers that sets them on a collision course with greeces creditors. A new contract between greece and europe would be reflected in a midterm plan with National Reconstruction and roll back the eurozones rules of operation, but will not condemn the Greek Economy to an eternal recession with unreal and primary surpluses, another name for austerity. Hsbcs Private Banking unit made accounts for years money for years by handling accounts for criminals according to a report. It adds that hsbc hid assets from tax collectors. Hsbc says its combined efforts enforce strong more stringent requirements now. To the markets now. It is a quiet monday in some ways. It is not really a quiet monday, but the rest of the week is going to be really busy. Jonathan ferro joins us. The weekend was busy. The map is looking pretty ugly. Losses of almost 2 in spain. 1. 5 in italy. We are down 0. 1 in london. A remarkable start. A little bit of nervousness is kicking in. I will bring you to the bigger map. I take you to athens. We are down by 5. 6 . The Prime Minister was not compromising, was he . He is not capitulated to it on his promises to the greek people. The bank is taking the pain. I was looking at the debt of these guys on the bloomberg terminal. It is heading south. Elsewhere, i go to the bond market. You have a finance ministers meeting for europe greece this week with europe. Look at the threeyear. I will show you the five year here. It is up to 16. 44 . There is not much liquidity in the market. That is significant. It is significant for greeces ambitions. I come out of the bond market and go to fx. I take you to turkey. I will have a look at euro lira. That is a weaker turkish lira. Look at dollar lira, record highs. It is not the Central Bank Governor taking the headline. The president of turkey is criticizing the central bank. He said the strengthening or weakening of the dollar is not something for him to evaluate but if the central bank cannot manage it, it will be held accountable for it. We look at the fx market we look at centralbank policy, we question independence. A lot of people will be talking about Central Bank Independence in turkey right now. We have been talking about it mostly with relation to rush of this morning. I said down with the head of the Turkish Central Bank. He resorted to poetry to not answer the question of independence. It was a great way of dealing with it. Really smart guy, but under considerable pressure. 25 minutes until surveillance. Tom keene is in new york. Ukraine merkel, what a week. It is going to be a week of meetings, as you know. It is all centered on europe. We will speak to hans nichols in berlin. The chancellor travels. I think you will find another meeting later in the week. David wu will join us from bank of America Merrill lynch. We will talk about new correlations in the market, none more important than what we have seen this morning from the turkish lira. We will talk about mergers and acquisitions. We will talk about money for nothing. The cheapness of fat is out there, the funds that are available. The cheapness of that is out there, the funds that are available. We will also talk about the grammys. Looking forward to that show. Lets get back to what Ryan Chilcote has been talking about. We were talking about the independence of the Turkish Central Bank and the pressure that that bank is facing. The Russian Central Bank is also under considerable pressure. Is it independent . That is one of the critical questions Everyone Wants to know. We have been getting an answer to the question. Ryan chilcote set down with the governor of the Russian Central Bank. She said the banks independent and that she checks the oil price three times a day. Oil is a major part of the discussion. Ryan asked her where she sees growth going in russia if oil stays where it is. If oil is going to be around where it is now, around 50 per barrel are estimates show the economy [indiscernible] we will have a contraction of about 34 . How big of an issue are the sanctions for you as you run the bank . Sanctions are a negative, of course. We can see that in our balance of payments, the pressure on the exchange rate, and on inflation. It is an issue. [indiscernible] we have developed new methods, new instruments to help banks and Companies Pay their external debt through currency refinancing. We are becoming more flexible in response to these challenges. That makes you work a little bit harder as a central banker . The sanctions make your life a bit more challenging . Naturally. How concerned are you about a banking crisis in russia . We are constantly monitoring the Banking System. There is no doubt that the economys construction will affect the Banking System. Bankers will offer less loans, lending rates will be higher. The quality assets will get worse. But we dont see any systemic problems. Our stress tests show that the Banking Sector will get through this difficult period in a stable condition. You have obviously been studying how other countries have gone through similar crises to the one that russia is in now. Have you identified something that you say to yourself, that is one thing that the central bank definitely will not do . What we will not do for sure . We will not spur Economic Growth by raising inflation and issuing more money. In my view, other countries experience with that has been absolutely obvious. Raising inflation by excessively pumping money in the system leads to the exact opposite. Secondly, we will not fix the exchange rate. Third, we will not impose administrative restrictions on capital flows. I think it is absolutely unproductive. The task we need to take on for our future, we need Structural Reforms because neither monetary nor budgetary policy can create stable Economic Growth. They are just conditions for growth. In order to create stable growth, we need to improve the investment side, we need private investment. Monetary policy is just a condition for reforms, which protect the country and put it in a different growth trajectory. That is what worries me most. Everyone always talks about conducting Structural Reforms, but they have not really happened. But now it is vital. You know the russian president. You were his economic advisor. Im sure you speak on occasion now. Do you think he is ready for Structural Reforms . Yes, im absolutely sure of that. The russian story. Some interesting answers and questions. Up next, can greece and the eu do a deal . We will ask the man who coled the negotiations back in 2012. Good morning, everybody. Welcome back. You are watching the pulse. the great Prime Minister has reaffirmed his governments rejection of the Bailout Program. Our next guest coled the group that managed the troika negotiations back in 2012 with greece. Joining us from new york is mr. Mark walker. He is the head managing director and milstein and cohen. Think you for taking the time so early in the morning. How isolated to the greeks look in your view at the moment. If you look at what one sees through the media and what one hears and the commentators, it looks quite isolated. I would hope that, in fact there are discussions at another level that are more constructive with more engagement. But i am not sure that is the case and i am not sure that is consistent with what the greek government is trying to do at the moment. In terms of reaching an agreement, in terms of exchanges of views which point toward an agreement, i would say there is a fair amount of isolation unfortunately. In terms of the position that the greeks are adopting, how far away is that from anything you think would be acceptable to the rest of europe . You know, it is not easy to answer that question because the position that we hear is only part of the story. There is a lot of discussion. Greece is understandably saying that there is a number of things that they want to change and they dont want to do. Clearly, their conclusion and they are not alone in their conclusion is that the austerity that they have been asked to follow and that they have followed from a fiscal standpoint quite exceptionally well, in fact, aside from Structural Reforms their conclusion is that that has not worked. As i say, they are not alone in reaching that conclusion. On the other hand, to reach an agreement, you have to focus not just on what we are not going to do or what we are going to do that is contrary to the program that was agreed, but rather what are the constructive measures that greece would take in order to promote growth . Unfortunately, at least from what one hears publicly, very little has been said on that point. I think to reach an agreement with europe, with the people who are funding greece, including the imf, greece needs to have a coherent consistent, and intelligent program that will return to growth. That has really been missing from the dialogue, at least the public dialogue, so far. Some sort of a growth plan. What if that plan b maybe a reduction be maybe a reduction in the surplus the country has to run . Are there things that could be done with the primary surplus that would make greece a little bit more able to deliver on the growth mandate . Are we doing with semantics . Could we change some of the language . We dont have to have a troika we could have Something Else in that would allow us to deal with the headline issues and that may between maybe tweak issues like the primary surplus and allow a deal to be constructed . There are several questions. In terms of the primary surplus, yes. I think greece could certainly make a strong argument to run a smaller primary surplus. If it accompanies that argument with a persuasive and can convincing plan as to what it will do with money that it can generate within the economy and how that money can be put to constructive use. Also if greece could focus more on some of the other reform elements of the Program Beyond Fiscal Consolidation. In terms of semantics yes, you can reach some agreement or facilitate reaching an agreement, but i dont think the real issues are on a semantic level. In terms of the troika, we have already seen within europe that the role of the ecb and the European Central bank is going to be diminished. The fundamental function that those institutions played was to monitor performance by grace greece of undertakings that they made as a counterpart to the international systems. I do not expect the oversight or monitoring function or verification function to disappear. I think that is important. Are there any areas that you can see that are positives . For instance they indicated they wanted to go after the oligarchs, very rich greeks that are not paying the taxes that some think that they should. That strikes me as an area that there could be compromised. Are there certain areas that could be built upon that are not being focused on now . Certainly tax collection is one. I think that the statements by the government in that regard have been well welcome. What is missing are any specifics as to how the government would go about improving tax collection improving Tax Compliance. It is not a new issue. It has been discussed for some length of time today. I think the concern is that there has not been any effective followthrough. It is also true that you cannot really make changes in peoples behavior overnight. Tax collections and Tax Compliance are not simply a question of enforcement and having inspectors. You also need to have a degree of willingness to comply. If people dont want to comply at the end of the day, you cannot really do it with enforcement. Yes, i think there are other issues within the economy. There are difficulties in starting businesses. There are closed professions. There are a number of constructive things that have been discussed for a long time that could be done. I think that part of the concerned and part of what makes the discussion so difficult is that there is a real lack of trust between greece on the one hand and the official creditors on the other hand who, rightly or wrongly believe the promises made by greece or undertakings made by greece outside of areas of Fiscal Consolidation have not been made with a great deal of sincerity that is to say, without any real intention of following through and the concern is that they have not followed through. I have heard from the greek government that they will argue that that is not true. But the perception exists and it needs to be dealt with and it is not a helpful factor in the discussions that are going on today. They have to listen to all the stakeholders, maybe the investors need to be listened to as well. To your mind, is the weak point the Banking Sector . If you were to look for an area where the story may break apart is it within the Banking Sector . The Banking Sector is certainly an area of concern. Recently, as we observed, there was a significant outflow of deposits. That seems to have been halted. The concern of the Banking Sector is the possible outflow of deposits. Secondly, to the extent that a large part of interim financing is raised by the government through the additional sale of treasury securities that will augment the concern that the Banking System has greater exposure and is more fragile. The Banking System has reduced its direct reliance or its importance as a funder of the government. Yes, the Banking System is a potential danger to the stability of the economy. It is not helped by the gamesmanship or interchange of threats between the European Central bank and the country. This is not the first time that the European Central bank has said, if a country does not adhere or make progress in terms of a program with europe then the European Central bank will not be evil to continue providing essential liquiditys. We saw that in cyprus as well. I think people are watching the cyprus story very carefully. Mark it has been a great pleasure. Thank you for talking to us. Coming up, the german chancellor Angela Merkel joined talks with president obama for talks. Willie agree on a way forward with russia . Will they agree on a way forward with russia . Welcome back. Lets take a look at the markets. Lets take a look at the greek markets particularly. They are down by 6 . The banks are certainly taking it very hard this morning. The big banks are down very aggressively. You can see the pricing. Some big moves on the bond market. That is it for the pulse. Ukraine is a big focus of surveillance. This is bloomberg surveillance. Should the west arm ukraine . There are nine dead, 26 wounded east of kiev. Greece wants reparations from germany. Francois hollande and Angela Merkel are speechless. Sam smith goes from unknown to known. We are live from our World Headquarters in new york. It is monday, february 9. Joining me, Olivia Sterns and brendan greeley. We begin in washington dc. German chancellor Angela Merkel is meeting with president obama later this morning. She is fresh off her trip to moscow, where she met with putin to try to find a solution to the growing crisis in ukraine. They will discuss whether to provide lethal weapons to ukraines military. Secretary of state john kerry insists there is no rift