On the referendum. I am Francine Lacqua in london. Brexit, trump, sundays italian referendum despite the Political Risk, my guest says the underlying Economic Trends are positive. Londons mayor says he is received assurances that u. K. Citizens living in the u. K. Capital will not be required compelled to leave after brexit. Opec ministers meet to try to finalize the First Oil Production cut in eight years. We bring you the latest from vienna. Here is Sebastian Salek. Koreas president says she is willing to resign after an influencepeddling scandal. On television, park apologized. Or the controversy opposition lawmakers and some politicians from her own party have been pushing for her impeachment. Parliament says it has not yet set a specific plan for her future. A plane carrying 81 people has crashed close to colombias secondlargest airport. There are apparently some survivors. Passengers included players from a brazilian football team. South korean president jacob zuma south africa president survived after top officials failed to force him from office during a meeting of the National Executive committee, according to members at the meeting. Zumas presidency has been marred by scandals and policy missteps that wait on the rims and put the nations Credit Rating at that weighed on the rand and put the nations Credit Rating at risk. Francine these are your markets. The story is in opec, with oil retreating below 47 before opec has its formal meeting on wednesday. We know that one of the ministers has already talked. We know there is resistance from saudi arabia to cut production. We are seeing a rally in metals run out of steam. Developed asian stocks slipping as investors try to figure out whether donald trump will theulate enough to reflect economy. You see a little bit of pressure on some of the banks in italy, this because of the referendum on sunday. You can see the dollar index, 101. 42. From brexit to trump, the italian referendum to elections across europe, politics appeared to be driving the markets as we despite investor concerns about how populist and antiglobalization impulses will play out. My next guest argues underlying Economic Times are relatively positive once we peel back Political Risk. Running as for the hour is Unicredit Group chief economist eric nielsen. Great to have you in the program as always. You have been the Eternal Optimist on europe. Sometimes you say you are worried about Political Risk. Give me the underlying cause of why the economy, you think, is a little better than people feel. It is consumption. We talk about policy, but if you look at where we are now member, economies are quite robust. The eurozone is cruising by about 1. 5 . A bit more than america. It is about the same in per capita terms. It is not what we would like it to be, but it is not bad. It is driven by private consumption. The have a little more fiscal expansion. A bit of a push. It is not great. But it is better. We see the first sign of some investment picking up. Double trade is not going anywhere, so exports are muted. Of this isow much thanks to the ecb being there . How much is it a sign that growth is they are . Growth is there . Once the ecb starts normalizing, we are on the same path . Francine the ecb has been the only game in town, for sure. Wasthe real effective one the big drop in oil prices a couple years ago that took inflation down and opened up the real income growth. That has been the single most important thing, i think. But the ecb has been very helpful. Point you make is really important, that we have to trust. If we do not trust, we have a problem. We have to trust the ecb will keep the pedal to the metal, keep going at this pace, until they see inflation around the target, somewhat on the rise. If they were to start to taper because they cannot find stuff they want to buy at the Risk Appetite they have, we have a problem. Francine i have a billion charts to show you. This is my first one, on inflation. Are many in blue, purple is france, and italy in yellow. Orange and red is the zero mark. We are becoming, in certain countries and i am thinking of italy some would say on reform a bull, or like japan, from an economic point of view. Erik i am not so worried. These numbers are very important. These are consumer prices. They are about zero, a little bit negative. That is good for real income in italy. Francine talk to me about how you price risk. See the difference between the german 10 year spread and the italian. Italy. Are nervous about and yet the spread is so much smaller than we had in 2012. Is that good or bad, to give politicians this room for reform . Erik it is good it is not as wide as it was before, because it destroys the transmission mechanism. Wide, you havery the problem that the private sector in italy would have de facto tight Monetary Policy. Is obviously related to the referendum. That has to settle down with him not too long. Otherwise, we have a problem on our hands. This is the spread. I brought it back to 2010. The spread seems very wide. The blue circle, you can see, is when mario draghi gave the famous speech in july in london, when he said he would do whatever it takes. Red is when we had berlusconi stepping down. The austerity measures he did not want to push through, and mario monti coming to power. What does this tell us . We forget what we have been through in the last few years in europe. Erik these were good times. The pink out there is a concern, but it puts it in perspective. One reason is qe. Sell throughally the btps, the italian debt. The bonds are in negative territory. Is not as, it dramatic as this picture shows. Terms in italy, it is not the spread that matters. It is the aftermarket borrowing costs. As it seems,bad but it is worth worrying. We have to get through the referendum and get a solution. Three three years ago, would you at that time have thought it would have been a very different picture now . Im thinking of the oil price. We have the allimportant opec meeting. It is amazing how low the oil prices have been. They have not filtered how much people have been consuming. Erik i would not have had any chance to predicted a couple of years ago. I think you are definitely right. With the strength of hindsight, what we have seen is turbocharged chinese production, from 10 to 5 . General demand has come down. Energy markets in europe and the states have become more. Fficient. The demand story and we have the supply of shale gas also. Francine it is chart tuesday. Have i impressed you . Erik i am impressed. Francine it takes a lot to impress erik nielsen, with unicredit. What a coming up. Londons mayor said he as received assurances that you e. U. Citizens living in london will not be compelled to leave after brexit. Opec ministers still set to be split over the first Production Cut. The president elect meets with retired general david trias, we will discuss the choices for u. S. Secretary of state. Francine this is bloomberg surveillance. Lets get the Bloomberg Business flash. Willsamsung electronics allocate cash flow to shareholder returns this year and the next, and conduct a major buy back through the end of january. That looks to complete a Holding Company structure. An activist investor, elliott management, has been urging samsung to restructure and return were cash to shareholders. Lost the latest bid to avert more strikes. German courts denied the injunction. Shorthaul pilots have stopped work today. All pilots will walk out tomorrow. You can say is headed for its longest ever industrial action, which has caused almost 400,000 Flight Cancellations this month and might cost the airline 45 million euros. A ceo has said politicians should resist calls to regulate facebook as a media company, despite concerns of fake news spread on the network that affected election results. The comments were made in an exclusive interview with bloomberg. The only restriction for facebook, i think, should be the rule of law. It is against the constitution, what brings people into jail. Ont cannot be published facebook. I think the whole idea that they , atld have a super editor would turn facebook into a global media monopoly. That is really going the wrong direction, from various points of view. The u. K. Telecoms regulator is forging ahead with its plans to legally separate bts network division. It will become an distinct company with its own board after the proposal. The board said the former monopoly failed to offer voluntary proposals to address competition. That is the Bloomberg Business flash. Thanks, Sebastian Salek. Italy goes to the polls on sunday for a constitutional referendum. Matthew renzi is weighing a resignation after the vote, even ,f voters pass returns according to this mornings newspapers. Renzi already said he would quit if the measures do not pass. We heard news from matteo renzi s office saying he is not stepping down even if the yes vote wins. Lets talk about some of the economic consequences of the poll, according to analysts in our bloomberg survey. Banking sector is most liquid to be affected. We are seeing pressure on medio banca, unicredit. Monte dei paschi, a delusion because of the credit eight lution because of the Credit Rating. We do not know what happens, because it depends on the referendum, whether it is a majority, a very small you could see italian politics being italian politics, almost anything happening. Erik that is right. Nobody would probably expect a yes vote. So the question is how close it will be, and whether the opinion polls we do not have any new ones anymore if they are right or wrong. We do not really know. And then, what will renzi do and what will the president do . As you alluded to, the big stion is, can italy whichever scenario comes through can they actually address the issue of these mediumsized banks, which everybody in the market are worried about, and which they have been dragging their feet on for too long . Francine can they . Worst Case Scenario for the markets, because markets like certainty let us say there is a no referendum. Renzi is out. A coalition. M we have a technocratic government. How would they govern the banks . Erik that is the right question, and we do not know that. It depends on what mandate the president instructs the caretaker governor would be. He would say, go fix the italian electoral law tot is, since july, back something more reasonable. We wait for the courts to say what is legal. It is being challenged, as you know. And then, we call elections once that is done. Bullish,which would be is he says, at the same time, fix those banks. We are talking about four banks, really. You naturalize them, or whatever you want to do. Or whatever. Ssels and then you are done. If that is done it is not big money. That is the big thing. Francine it is not, but you have rules in place. Even if this government has fixed it could this be a Lehman Brothers moment . Possiblyould not believe it would. These banks are too small. You have the ecb involved. And all the rest of it. Do theel is that you same as you did last year, with the small banks under guidance. Other banks have to help the retailers who may have been bailed him, or there is flexibility in the system. Everything you hear from brussels and berlin they have a lot of flexibility. Francine even berlin . Erik even berlin. I suspect it is because they have a few banks they have to deal with themselves. Change thehy not rules already . I mean, you are talking about a small amount of money. We have a lot of italian ceos, and this is what they keep saying. The amount of money could be easily found if the rules were changed. Actually right. The problem is the rules came into effect only at the beginning of this year, and i dont know why in the world you put these rules into place at a time when you still have not sorted out the banks. Out, for theoint whole system like this, we are probably talking 10 billion, maximum 15 billion euros. That is less than 1 of italian gdp. The spending package was 40 billion, which was 6 of gdp. This is really just the politics of the retailers. In italy, there has been we have this prediction this tradition that retailers do not do deposits that are insured. This should have been taken into account. Francine very quickly, we had mario monti sitting in your seat, and he said we should vote no to the referendum because matthew menzie has not done enough because renzi has not done enough. Do you agree . Erik i love mario monti. I love i think the world of him. But on this he is wrong. He says that renzi has diverted from what he should have done with the banks. That is correct. But it does not take away that this reform, we are better off if it gets a yes. Francine think you very much. Erik nielsen at unicredit stays with us. Up next, can you have your cake and eat it too . The mayor of london talks about brexit and that you about brexit and the capital. Londone the future of as a financial and Political Center is one of the major questions hanging over brexit negotiations. I discussed these uncertainties with london mayor sadiq khan. He has received private assurances from the u. K. Government that e. U. Citizens living in london will not be compelled to leave the country. He expressed concerns about how Prime Minister theresa may has been handling brexit negotiations. my interpretation of the British Public vote was to leave the e. U. , its structures, and they leave institutions. It is important to disentangle that from jobs and prosperity. Yet we have on our doorstep 500 million people. We have got a situation where there are lots of uncertainties around the world. We had, recently, u. S. President ial elections. The referendum in italy in december. Elections in france in march and may. German elections, dutch elections. We have to provide clarity that we do intend to have access to a Single Market. We do intend to be openminded but it comes to attracting talent. Francine what easy see as a blueprint for brexit . Message is confused. Do they know what they are looking for . Mayor khan i hope when theresa may says she is keeping her cards close to the chest that she knows what is behind those cards. To chieflarity leads executives, innovators, Business People wondering, worried whether there is a plan. What we need to do over the next weeks and months is to reassure people there is a plan. What i said during my speech was, i can understand why, when you go to buy a car, you do not want to disclose to the salesman youaleswoman the maximum would pay. I understand that. But you have to give the idea of what sort of car you want. If we could telegraph to the e. U. What our intentions are once we left the european union, the access to the Single Market, the ability to attract talent, access to services my worry is there is confusion, which leads to the worst thing for a businessman or woman. Francine that was city con speak that was sadiq khan speaking to me earlier. Careless folder left once again for the press to see. But how are the negotiations going . Do we even know what the government is thinking . Erik not very much. No negotiations have started. There is a report that theresa may in berlin said, let us agree that brits living in other countries can stay. That was in the interview. Apparently, merkel said no. You have to trigger article 50. We are not starting to peel off things. That is where we stand. Europe said, the ball is in your court. And the brits have not really done anything so far. Maybe they have prepared themselves, as that note suggested. I hope they have more than those notes, though. Francine i know. It would not take us very far. Erik nielsen from unicredit. Up next, there is one day left before opec ministers meet. They could finalize the First Oil Production cut in eight years. Francine this is bloomberg surveillance, i am Francine Lacqua in london. Koreanan the south president says she is willing to resign after a scandal. She apologized for a third time over the controversy. And somen lawmakers from her own party have been pushing for her impeachment but parliament has not yet set specific plans. A plane carrying 81 people has crashed is to columbias secondlargest airport. There are apparently some survivors. Passengers on board included players from the football team. South african president has survived the most serious challenge of his leadership yet. During a meeting of the ruling partys National Executive there were members of the committee at the meeting. He has put the nations Credit Rating at risk. Global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. Im Sebastian Salek and this is bloomberg. Francine opec officials have so far failed to bridge their differences to cut production. Russia says it is not planning to attend crucial talks tomorrow. Lets talk about the oil markets and speak to an Oil Market Analyst who is in vienna this week. Great to have you on the program thank you for joining us. Give us a sense of whether it is 50 50 at the moment. Can they surprise us or is it dead in the water . The news flow is not really clear, but i think moore is pointing towards cuts. If you look at the situation and the oversupply market, the thought is probably the saudis are better off to cut production. In terms of nonopec corporations, i think we have to wait for the outcome tomorrow and then they will have some further talks on nonopec operations. Thecine at the same time, oil minister from saudi arabia seems to think markets, whatever happens will clear themselves in 2017. Is this just a negotiating tactic to try to get back at iran . Definitely, there is a lot of negotiation tactics going on. If you look in the second half of 2017, it