Im guy johnson. And im francine lacqua. Talks are ongoing between greece and the euro area today as the greek government looks to carve out a new bailout contract. Lets get straight to hans nichols in brussels. What is the most Important Development in the last 24 hours . Good morning, francine. They do have these technical conversations going on for a longterm program. They want to agree on all the numbers. Eu officials, technical advisors, and greek officials. They are going to have a political agreement. We dont have a political agreement yet. We have an agreement to go through the numbers and continue the negotiating process. They need the same data sets and that is why we need to have thats why it is important that you do have these numbers. Angela merkel is positive. She says that mr. Tsipras was someone that she could work with. We gave each other a friendly greeting. I congratulated him on his election win. I told him that from my side we want to work well together. We will take a look at the different points where we need to find common ground. It was very friendly. Where germanys prepared to compromise, they are saying not all of the bailout program. Not all of the points need to the adhered to. The greeks think about 70 is level. The question is what do you do with the other 30 . That could be where the key negotiation comes on monday. Is it going to be facesaving for the greeks . Are they going to be able to sell this to their public . If you do have a renegotiation, it could need to the past by all of the national parliament. Hans, im looking at the screen in front of me. Euro bank, plus 90 . National bank of greece, plus 18 . Alpha, 14 . The market likes it. Any sign of a deal and these banks are popping. We have seen the banks improve. Thats happened over the last three days now. There is there are quite a few notes of caution here. One of the notes of caution that is in just mr. Juncker saying he remained concerned, the ecb has raised the Borrowing Capacity for the greek banks to 65 billion. So you have e. L. A. Up to 65. The ecb is clearly giving the banks some breathing room. The question is, how desperately do they need it . Are the banks under more pressure in terms of withdrawals than their stock prices indicate . Thank you so much. Hans nichols with the latest from brussels. That brings us to the markets. Lets look at the greek banks and the wider european markets. What weve got here is the athenian markets doing very well. The key level on the dax is 11,000. Weve been through that this morning. We retreated a little bit. Nevertheless, the market on the front foot. Volumes are a little light on the dax. Weve had a touch of that level. Some good german data being delivered today continues to be one of the key beneficiaries of this weaker euro. That surprisingly strong gdp number probably a factor. We also have gdp figures out of italy. The economy stagnated. It is not weaker, it is actually better than expected. All im saying is that germany stands out as a very strong number. Not as bad as we were thinking. Greece continues to be a huge topic of conversation. In an exclusive interview with bloomberg, guy hands questions the idea of giving greece a free pass while spain, ireland, and other countries have and continue to work their way through these Structural Reforms which are having such a big impact on their economies. You have the greek Prime Minister almost saying, i dont feel this is what we should do but ive got no choice because it is a democracy and i was voted into do it. It is a very clever way of arguing. You blame it all on democracy. We have to be unreasonable because we were democratically elected to be unreasonable. How unreasonable do you think hes going to get . I think hes becoming more reasonable by the day. I think there wont be a greek exit. I think it is more when you say reasonable, you mean rational . I dont think he wants an exit. The vast majority of greeks are happier with europe than the vast majority of brits. It is seen as a very good thing in greece. What they dont like is austerity and they want to have their cake and eat it. They want both the protection and support of europe, but they dont want to pay for it. I think the germans have reached a point where they need to put a line in the sand. Europeans generally feel that way. I think, for the future of europe, there probably is a need for a line in the sand. Otherwise, the risk is that every country says, if the greeks get away with it, so can we. Look at the irish and the pain the irish have taken, and the spanish, to go through their austerity programs, and what it has meant to growth rates in those countries. They deserve their rewards. Theyve worked for it. Why should the greeks be given a free pass when the irish and spanish have taken just as much pain and worked just as hard . Do you worry that unintended consequences could come into force and we dont understand how the impact will be manifested across europe . Is this a lehman moment . I dont think it is. The Greek Economy is very small. The fear is if people give into greece and give greece a free pass. The antieuropean parties across europe will really seize on that. In germany, there will be a huge swing. We are just bailing out the weaker countries in europe. They are not actually changing. Why on earth do we continue to do it . You will get that across, in the u. K. It is an incredible boost if the greeks get bailed out. If the greeks dont get bailed out, i think it goes the other way. People say, there is some discipline in europe. Brussels isnt just giving a money away to its best friends. Theres a real focus here on some discipline. I think the real unintended consequences is the moral dilemma of giving in. Guy hands talking to me yesterday. You can catch the exclusive interview with mr. Hans throughout the day on bloomberg. It was a great interview. You can also join the conversation on our twitter. Our twitter question is, what did guy hands get wrong about the Music Industry . Our guy johnson spoke to guy hands and he was pretty good on that. He was certainly good on bouncing back from it. Coming up, a bloomberg exclusive with the worlds biggest cosmetics maker. We will hear from loreals ceo. Plus thomas pinks international expansion. The ceo and president joins us in ennis glues it conversation later in the show. Welcome back to the pulse. We are live in bloomberg tv and radio. Greece is seeking a new contract with the euro area on how to continue its bailout. Can germany and greece find a compromise before time and money runs out . Joining us now is bank of America Merrill lynchs chief economist. It seems weve seen this all before. And yet, if you were to speak yesterday, i would have said the germans and the greeks have never been this far apart. It seems they are coming closer together. It is progress, which is better than anything else. What we have is at least an agreement to talk about the technicalities. Basically, the greeks seem to be very adamant that they should be starting things from scratch. The germans seem to be adamant that the program is still preferable. For me, the first clear sign that there is willingness to go she it to negotiate, the rhetoric from both sides. From the greek side, as long as there is no pressing need and i dont think there is a pressing need right now, it makes sense for them to continue to be extremely tough in negotiations. On the other side of the equation, for germany, it would be full dish be foolish. I think the market is taking all this in stride. The growing view is that it is all about rhetoric, all about giving tone to everyone to climb down from their initial position. I dont think they will have something on monday, apart from an agreement to continue to talk. The ecb has been instrumental in keeping things together. This increase in the ceiling is another thing that the ecb will not do anything drastic, at least will not make any drastic decision on this. So they keep things functional. There probably still a bit of money in the greek state coffers. If you were spain portugal, ireland, any of the countries that have been in the program, have had the same things imposed upon you, how would you read this story . Its a difficult conversation. Who is spain, ireland, portugal . In some cases, and that was clearly true in ireland portugal, and spain, the governments would have pursued the kind of policies that they are negotiating. There is a conviction in the portuguese government that the reforms were needed. But the possibility of a better deal, this was the point that guy hands was making yesterday, why should we do this when they are getting that . If there is some opportunity to improve the deal, do we have to renegotiate . We have already improved the conditions for greece many times. No one else after we restructured debt asked for this treatment. So they will be happy. They are not happy. My understanding is that currently, tsipras has no allies within the council. The governments of portugal, spain, ireland they have been selling the adjustments. It cannot be too easy. Maybe greece needs to be, a pound of flesh needs to be extracted. At the same time, the tide has turned against austerity. By this time, we were expecting more growth than we are getting, which is none. You can say that the bailout was not mismanaged but badly put in place. A botched job. On austerity, if you take spain spain is actually allowed to drift every year from its fiscal targets. Look at where the deficit is today. Everyone has been allowed to drift. Spain is in a net fiscal accommodation because of the reform of income tax. Everyone is looking the other way. Germany never said a word. To me, it is a very subtle game. What matters is that things need to be not latent. As long as everyone skirts around the issues of little bit, allows himself or herself more time to deliver, it is fine. The problem that greece creates is the confrontational point of view. It is one thing not to be able to deliver on the targets once you show that you were trying to, and another thing to say, i dont think thats the right approach. By the way, every time greece comes back with the question of the 1953 debt consolation on germany, every time they come back with the war reparations story, that creates additional tension in germany. For me, tone is not important in that conversation. Can i have a quick 30 seconds on the german gdp number this morning . The problem is, the previous quarter wasnt germany had one of the worst gdp ive seen anywhere in the world. 1. 6 is basically in line with what we have for the annual average. We should see some acceleration towards 2 . Q4, i dont think is that much relevant. What you have seen is the fact that they seem to have overcome because of russia. What is even more important for germany is that the rest of the area definitely is looking better. Spain, 2. 8 annualized growth. There was no fluke there. Gilles moec chief european economist at bank of America Merrill lynch. The worlds biggest cosmetics maker. We are going to hear from loreals ceo in a bloomberg exclusive. Welcome back. You are watching the pulse. Lets get you another bloomberg exclusive. After loreal sales beat estimates, we spoke to the companys ceo, jeanpaul agon. He told caribbean, and about the impact of a strong dollar on his business. To be honest, for 10 years it was negative. For 10 years, European Companies and loreal suffered from the overvalued euro. Now the euro is back below its level when it was introduced 14 years ago. That is very good news. It will help our cost structure, but it will also of course help the translation of our profitability worldwide. It is very good news and we will make the most of it. Does that mean lower prices of your products . We will strengthen the support of our brands, and it will help, as i said, the translation in euro of our sales and our profits. What about the currency volatility in emerging markets . Tell us the outlook for asia, especially china. The situation is pretty stabilized now worldwide. After a period last year where we saw some instability in different parts of the world, brazil, other places, now the situation seems to be more stable, with one exception russia. The ruble decreased a lot. We think this should be pretty stable for next year, and pretty ok for us. We want in 2015 to continue with the stronger market price that weve been starting 20 years ago , where we double our percentage of sales in the market every 15 years. We keep increasing significantly. These new markets will be 41 of our sales. We also spoke to jeanpaul agon about the Consumer Products rebound and his outlook for 2015. Of course it is sustainable. We had a first half of 2014 where the Consumer Division was a bit weak. It was due to growth of the markets. The markets globally were weaker than the year before. Especially in the u. S. It never happened before. It was pretty exceptional. The end of the year was better. The market in the u. S. Rebounded. We were able to grow our market shares better, i would say, in western europe and many parts of the world. So absolutely this is what we want to achieve this year and the years after. For the global Cosmetics Market last year was one of the weakest in many years. 3 to 3. 5 growth, thats what you expected back in november. What do you expect for 2015 . How is loreal going to perform . Good question. The market in 2014 was a bit weaker. We have to be careful. It was 3. 5 compared to the year before which was 3. 8 , 3. 9 . We are talking about a very little slowdown. I think that 2015 should be more or less the same, or maybe a bit better. There are some positive elements like the strong decrease of the oil price which probably will translate into gas prices lower, and more money in the pocket of our consumers. We know that this helps the consumption of our products. This could be very positive for the u. S. , for western europe, so im optimistic. That was the ceo jeanpaul agon of loreal. We are back in just a couple minutes. Welcome back to the pulse live from bloombergs European Headquarters in london. These are the Bloomberg Top headlines. European leaders warned russia of more sanctions to force a ceasefire in Eastern Ukraine. Angela merkel said the eu leaders called on the European Commission to get further measures ready. Greece is seeking a new contract with the euro area on how to continue its bailout. The greek Prime Minister met his European Union peers at a summit yesterday. Greek negotiators and euro area creditors meet today to discuss the way forward. Germanys dax index rose above 11,000 for the first time after reports showed the nations economy accelerated last year. German gdp grew 0. 7 . France grew 0. 1 in the same period. We are now just below that crucial level. Right, lets go to derby. Lets talk rollsroyce. Last year was not a stellar year for the engineering giant. Shares losing one third of their value. The headwinds are likely to continue. Here with more is caroline hyde. So, topline lower, bottom line lower. Unsurprising. Not one, but two profit warnings last year. Sales down by some 6 . That was the first drop in revenue weve seen in a decade for rollsroyce. That is what has been put into question, whether it should be doing land, sea, and sky. What caught my eye was free cash flow, down by two thirds. Not only as 2014 been a bad year, 2015 is not going to be pretty. They are saying some markets have deteriorated even since november when they gave us that last update. They make a lot of the engines for the defense area. Economies are slowing down in the likes of china. We are seeing less military demand. On the commercial side of things, theyve had Slower Growth in china and europe, a threeyear delay to the bowling the boeing dreamliner and the reengine airbus. They are the sole provider of that. Suddenly airbus is slowing down production too. Things out of their control are hitting them, notably russia. The impact of sanctions heading them there. And of course the oil price. Crude prices have hit orders for the offshore oil and gas industries. This is an issue and they say, targets are looking pretty. Weve got sales likely to be down 2 and profit falling anywhere up to 12 . At the same time, rollsroyce is implementing a lot of changes. Is it enough to convince investors to stick around . Theyve announced 2600 jobs to go. Theyve already filled about 500 of those cuts. They are trying to impose new people at the top. The u. S. Leader is retiring. Theyve had a new finance director imposed. But there are some really huge monumental changes being called on by the likes of invest tech. They had a report, saying, split this company up. Dont do land, sea, and sky. Just do sky. Selloff the marines unit and the nuclear reactors. The way that you do this is perhaps, sell the assets, get about 6 billion, or have a dual listing and increase the value by about 20 . The long term view is that the strategy they are trying to employ would work, but you have a long time to get there. Are you going to convince investors in that time . They feel, if you want bang for your buck, split up. I think the chief executive is trying to sound upbeat. Hes saying, in the longterm we will be good. Caroline, thank you so much. Lets move on. Guy hands, best known for his money losing investment in the Music Publishing company emi, in an exclusive interview, the founder of terra firma talks to me about how the period has shaped his investments. Theres a group in the middle who said, it happens to everybody. Terra firma is no different. The only difference is you had huge amounts of press about it. What most people did was just roll over and die. You guys spent three years fighting to try to make emi successful. In the end, debt was enforced against you. We accept that. Then youve got the people who feel pretty hurt and i understand that. But luckily for us that is, i think, a reasonably small percentage. Is there an argument to be made that you are still in the penalty box as a result of emi . I dont think so. You got a huge split. We have over 200 investors. Undoubtedly, there are some whove been with us from the beginning and clearly felt that emi was foldable. A lot of people have increased their exposure to us over time and have done very well with investments theyve made sense. Some of those said look, every major firm did some deal back in 2007 which went wrong. None of us actually expected the crash that occurred. Therefore, from our point of view, the only difference between you and them is, emi was very public. Clearly, you have gone on to try to get our money back with re