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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: This is the Bloomberg Daybak podcast, available every morning on Apple,

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Speaker 2: Spotify or wherever you listen. It's Monday, the twenty fourth

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Speaker 2: of February in London. I'm Caroline Hepcare.

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Speaker 3: And I'm Stephen Carolin Berlin, where Friedrich Martz is promising

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Speaker 3: to form a coalition government by Easter. As his conservative

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Speaker 3: alliance wins Germany's federal election and Asolaf Schultz leads his

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Speaker 3: party to its worst results since World War Two, the

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Speaker 3: far right AfD gains enough support to become the country's

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Speaker 3: main opposition.

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Speaker 2: In other news, three years since Putin's full scale invasion

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Speaker 2: of Ukraine, two of Trump's top advisors declined to describe

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Speaker 2: Russia as the aggressor. Plus lessons in finance stretch, UK

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Speaker 2: parents tap home equity to pay surging private school fees.

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Speaker 2: Let's start with a roundup of our top stories.

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Speaker 3: The conservative Friedrich Mertz says he will form a new

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Speaker 3: German government in less than two months after his election victory.

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Speaker 3: His center right cdu CSU alliance one almost twenty nine

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Speaker 3: percent of the votes according to the preliminary results. Mertz

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Speaker 3: says the country can't afford to wait for long coalition negotiations.

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Speaker 4: The CDU and the CSU, the union. We have won

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Speaker 4: the twenty twenty five federal election. The world out there

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Speaker 4: will not wait for us, and it will not wait

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Speaker 4: for lengthy coalition talks and negotiations either.

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Speaker 3: Mertzer has to build that coalition, which typically takes weeks,

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Speaker 3: if not months. His most likely option is the SPD

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Speaker 3: party of outgoing Chancellor Olaf Schultz, which saw its worst

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Speaker 3: performance since World War II, falling to third place. The

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Speaker 3: other major winner was the far right Alternative for Germany party.

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Speaker 3: One in five voters chose the AfD, which is called

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Speaker 3: for Germany to leave the Europe, the deportation of migrants

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Speaker 3: and lifting sanctions on Russia. Their chancellor, candidate Alice Videl,

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Speaker 3: says the party is on course to become the largest

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Speaker 3: at the next election.

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Speaker 1: We have doubled our votes. They wanted to cut us

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Speaker 1: in half. The opposite has happened, and I must say

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Speaker 1: one thing. Our hand will always remain outstretched for participation

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Speaker 1: in government, to implement the will of the people, the

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Speaker 1: will of Germany. We are ready to participate in government.

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Speaker 3: George Lands just bye. Vidal's party, winning over twenty percent

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Speaker 3: of the vote. The other parties have ruled out going

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Speaker 3: into government with them because of their policies. Parts of

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Speaker 3: the AfD, including three state chapters in the east of

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Speaker 3: the country, have been classified by Germany's domestic security agency

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Speaker 3: as extremist. The euro has strengthened in Asian trading by

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Speaker 3: as much as point seven percent after the German election results.

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Speaker 3: Markets see the outcome as paving the way for a

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Speaker 3: pivot to increased government spending. Eric Nielsen, chief economics advisor

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Speaker 3: at Unicredits, says the likely coalition and partlers are all

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Speaker 3: in favor of more investments. If Mather's wanted them to

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Speaker 3: revise the death break period right, and.

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Speaker 4: It's not just to spend more, it is to invest more.

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Speaker 4: So we know the SPD and the Greens on favor.

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Speaker 3: We know that MATHS and the CDU have opened up

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Speaker 3: the idea, so it's going to come. That's Eric Neilson

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Speaker 3: from UniCredit. Although the likely CDUSPD coalition is being viewed

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Speaker 3: favorably by markets, the far left and far right parties

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Speaker 3: have enough seats to block any reform of Germany's constitutional

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Speaker 3: death break, which limits government borrowing.

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Speaker 2: Now to other stories. Kis Starmer will join other world

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Speaker 2: leaders on a call hosted by Kiev today, three years

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Speaker 2: on from Russia's full scale invasion of Ukraine. The meeting

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Speaker 2: to discuss security guarantees comes off to President Zelinsky said

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Speaker 2: that he would be ready to step down if it

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Speaker 2: secured peace for his country.

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Speaker 3: Give to achieve peace, you really need me to give

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Speaker 3: up my post.

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Speaker 5: I'm ready.

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Speaker 3: I can trade it for NATO if there are such conditions.

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Speaker 2: The comments come after US President Donald Trump describe Zelenski

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Speaker 2: as a dictator and called for Ukraine to hold elections

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Speaker 2: as ties between the two countries sour. Meanwhile, two of

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Speaker 2: President Trump's top advisors this wee can decline to describe

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Speaker 2: Russia as the aggressor in the conflict, as the administration

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Speaker 2: seeks Vladimir Putin's support for a peace deal is what

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Speaker 2: US Defense Secretary Pete Hegseith told Fox News Sunday.

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Speaker 6: My question is does all the finger pointing, in par

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Speaker 6: clutching make peace more likely? That's the enduring question. The

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Speaker 6: President is asking. He wants peace, and if that's the case,

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Speaker 6: you've got to stare down the Russians in Vladimir Putin

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Speaker 6: and who they've chosen to negotiate and have earnest conversations

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Speaker 6: about difficult things about security guarantees, about twenty fourteen borders,

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Speaker 6: what those will look like about NATO member. Same thing

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Speaker 6: with Ukraine, constructively and productively, So standing here and saying

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Speaker 6: you're good, you're bad, You're a dictator, you're not a dictator.

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Speaker 3: You invaded, you didn't.

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Speaker 6: It's not useful, it's not productive.

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Speaker 2: Hexas comments on Fox New Sunday were echoed by US

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Speaker 2: National Security Advisor Mike Woltz, who also opted to not

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Speaker 2: directly address the question when asked. Meanwhile, Ukraine's Zelenski says

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Speaker 2: that the US has dropped its demand for Kiev to

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Speaker 2: commit to paying five hundred billion dollars as part of

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Speaker 2: talks to give Washington a cut of the country's mineral wealth.

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Speaker 2: Zelenski says a deal must be contingent on US military

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Speaker 2: and security guarantees. Several US government agencies have advised employees

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Speaker 2: to ignore a demand from Elon Musk's government evisiency team

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Speaker 2: to justify their jobs by email or face dismissal. The agencies,

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Speaker 2: including the Pentagon and Department of Justice, have cited potential

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Speaker 2: legal pitfalls and agency autonomy in telling workers to pause

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Speaker 2: on replying to the message. The email was also marred

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Speaker 2: with criticism from unions, who call it cool and disrespectful,

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Speaker 2: vowing to challenge any dismissals resulting from the directive. As

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Speaker 2: a new twenty percent tax on UK school fees takes hold,

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Speaker 2: parents are going to extra lengths now to keep up

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Speaker 2: Bloomberg's tea Adebayo has more.

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Speaker 5: Families are tapping equity locked in their homes to meet

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Speaker 5: the rising cost of British private education. Other lines of credit,

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Speaker 5: including monthly installment plans, are also growing in popularity as

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Speaker 5: caregivers grapple with the new VAT charges introduced in the

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Speaker 5: middle of the academic year. Seeking help from relatives or

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Speaker 5: taking on more work is the first port of call

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Speaker 5: for many families, but the number looking to remortgage or

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Speaker 5: raise cash using other methods is soaring. Premium Credit, the

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Speaker 5: largest lender of school specific short term plans, told Bloomberg

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Speaker 5: the amount loaned in unsecured lines of credit rose forty

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Speaker 5: percent in January compared to the same period last year.

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Speaker 5: The Labor government says introduced the levee to finance investments

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Speaker 5: in the state funded education system in London to you

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Speaker 5: at a bio Bloomberg radio.

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Speaker 2: And those are our top stories for you this morning

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Speaker 2: on the market. So right now, the euro is strengthening

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Speaker 2: half of one percent against the US dollar. German stock

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Speaker 2: futures also up by one percent this after the Conservative

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Speaker 2: leader Friedrich Mertz said he'll move quickly to form a

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Speaker 2: new government after the elections. Asian stocks sliding after declines

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Speaker 2: on Wall Street on Friday. The Hang Saying Index right

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Speaker 2: now is down seven tenths of one percent, although Japan

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Speaker 2: is closed for a holiday, so we have no cash.

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Speaker 2: Treasuries trading until seven am. Equities on Friday really fell

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Speaker 2: into the close after a raft of weak US day

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Speaker 2: to the s and P five hundred for one point

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Speaker 2: seven percent, the NAWS that was down two point one percent.

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Speaker 2: Bond surge yields on ten year treasuries declined eight basis

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Speaker 2: points to four forty three to ten year yields also

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Speaker 2: declined six basis points on Friday. And we have another

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Speaker 2: big test for this week in the AI space because

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Speaker 2: we've got Nvidia earnings which are out on Wednesday. So

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Speaker 2: those are the latest figures when it comes to the markets.

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Speaker 2: But in a moment, we're going to talk more about

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Speaker 2: the Ukraine War three years on from the day of

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Speaker 2: Russia's invasion, and also, of course we want to bring

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Speaker 2: you the latest from Berlin and what's been happening after

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Speaker 2: the election. Last night Stephen Carroll is there with us

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Speaker 2: and he was out and about reporting last night on

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Speaker 2: our Bloomberg television special after the election results. And this morning, Stephen,

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Speaker 2: very good to have you with us. Should we dig in?

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Speaker 2: Friedrich Mertz needs to build a coalition. He really only

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Speaker 2: has one option, or explain the options that he's got.

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Speaker 3: Yeah, I mean, if you look at the numbers, the

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Speaker 3: preliminary results, and we want to find a results for

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Speaker 3: a few weeks time. So this is what is the

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Speaker 3: basis of coalition building. Have the CDUCSU alliance led by

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Speaker 3: Friedrich Mark with two hundred and eight seats, you need

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Speaker 3: three hundred and sixteen for a majority in the new Bundestag.

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Speaker 3: So if you add the one hundred and twenty seats

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Speaker 3: the SPD has, you get there with a twelve seat majority.

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Speaker 3: So the MAT's pretty simple. Now, these are parties who

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Speaker 3: have been in coalition before. That doesn't mean it's going

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Speaker 3: to be easy to negotiate a deal between the two

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Speaker 3: of them, but in the round of post results interviews

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Speaker 3: and debates that took place last night, the direction of

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Speaker 3: travel was clear that they were willing to work together.

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Speaker 3: Here is the outgoing finance minister, the SPD's Georg Cookies,

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Speaker 3: speaking to Bloomberg's critic group to last night.

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Speaker 7: Well, it was a disaster in terms of the result,

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Speaker 7: and the congratulations goes to the winner of the elections,

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Speaker 7: the Christian Democrats, Ridlich Matz, has the mandate now to

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Speaker 7: form a government.

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Speaker 3: So clearly pointing to the fact that the SPD had

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Speaker 3: a terrible night, I mean, this is the part it's

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Speaker 3: been in power for most of the last three decades

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Speaker 3: in Germany. A big shift in their support, but pointing

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Speaker 3: to their expecting Friedrich Martz to lead the next government

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Speaker 3: and that you're leaving the door open for them to

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Speaker 3: work together now. These parties there will be points of

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Speaker 3: friction over things like social welfare spending, migration, expected state

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Speaker 3: financing to fund some of the massive outlays needed, particularly

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Speaker 3: in defense as well. Timing is going to be very

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Speaker 3: important here. Friedrich martzys he wants this coalition to be

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Speaker 3: formed quickly. He won't be negotiated with Olaf Schultz, by

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Speaker 3: the way, the outgoing chancellor. He said he's going to

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Speaker 3: be focusing on his role as chancellor until the new

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Speaker 3: government has formed. It's to other people in the SPD

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Speaker 3: that'll pick up the baton there.

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Speaker 2: Meanwhile, of course you were on election night at the

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Speaker 2: event for the far right AfD. The party saw its

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Speaker 2: best ever performance and this was also one point of

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Speaker 2: why people were watching Germany so closely. I mean, it

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Speaker 2: may be the conservative Friedrich Mertz has won the most seats,

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Speaker 2: but actually the AfD coming in second.

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Speaker 3: Yeah, and I mean look, it was a party atmosphere

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Speaker 3: from long before the results were announced. There was sparkling

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Speaker 3: wine on arrival, plenty of beer and even a barbecue

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Speaker 3: going outside at the AfD. This is a huge moment

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Speaker 3: for a party that was only formed in twenty thirteen,

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Speaker 3: twelve years ago, first designed to oppose membership of the

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Speaker 3: euro but evolving then into this hardline anti immigration party

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Speaker 3: that's now advocating for sanctions on Russia to be lifted.

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Speaker 3: Alice Vidal, the chancellor candidate from the AfD, pled to

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Speaker 3: overtake the CDU and CSU at the next election, and

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Speaker 3: that's really part of the key message we had out

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Speaker 3: of this party after this election win. It's interesting that

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Speaker 3: didn't quite reach the heights that some poles had ascribed

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Speaker 3: to them. So there was a tiny element of disappointment

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Speaker 3: when the first exit poll results were led out. But

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Speaker 3: they're clearly going to be the biggest party in opposition.

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Speaker 3: The firewall in German politics where other parties refuse to

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Speaker 3: deal with the AfD remains in place, so that is

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Speaker 3: part of the calculation going forward. The AfD will be

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Speaker 3: the opposition. They have now the opportunity to advocate for

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Speaker 3: their positions. From that position, they'll be the chief critic

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Speaker 3: for the government. Mertz promising potential voters that as chancellor

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Speaker 3: he would introduce tighter controls on migrations. That just gives

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Speaker 3: you an idea of some of the influence that the

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Speaker 3: AfD policies have had on the election debate here in

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Speaker 3: Germany as well. This is a huge moment though in

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Speaker 3: postwar German politics. Remember this is a party that three

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Speaker 3: of their state chapters are classified as extremist. They're under

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Speaker 3: surveillance by German's domestic intelligence service. The Firewelf for now

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Speaker 3: remains intact. But as Vidal's message at their event last

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Speaker 3: night is that they're looking ahead to the next election,

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Speaker 3: and she did say they were open to overtures for government,

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Speaker 3: but that's already been ruled out by the CDU.

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Speaker 2: Yeah, it seems quite reminiscent or brings to mind what's

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Speaker 2: been happening in France, maybe Marie lepenn and Jordan Bardella's

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Speaker 2: party there too. In terms of the market reaction, the

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Speaker 2: euro has strengthened on the back of this result. It

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Speaker 2: does seem to be that there's some investor relief and

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Speaker 2: do you think that's going to last.

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Speaker 3: I mean, look, there's a couple of questions in place here.

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Speaker 3: The optimism on the markets that we're seeing comes from

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Speaker 3: the fact that there is a coalition of mainstream parties possible,

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Speaker 3: and the fact that it's two parties that are needed

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Speaker 3: rather than three, which was thought to be a likely option.

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Speaker 3: Seems more stable and that's something that markets, of course like.

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Speaker 3: But let's not underestimate the challenges this next government is facing.

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Speaker 3: There's been two years of economic contraction in Germany. We

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Speaker 3: know about the demands for higher defense spending as well

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Speaker 3: huge problems in the manufacturing industry here still under performing

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Speaker 3: and job cuts being announced by some of the major manufacturers.

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Speaker 3: Then you have the risk of tariffs from the United

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Speaker 3: States coming down the line as well. Now, economists have

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Speaker 3: long been calling for a massive increase in public spending

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Speaker 3: in Germany for things like updating infrastructure helping the economy

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Speaker 3: to modernize. These results don't translate, though, into an easy

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Speaker 3: lifting of the debt break the constitutional provision that limits

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Speaker 3: Germany's government borrowing. So the mainstream parties won less than

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Speaker 3: two thirds of the seats in the Bundestag, which means

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Speaker 3: they're short of the votes needed to revive those limits.

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Speaker 3: Because the AfD and the Left Party, which also performed

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Speaker 3: very strongly as well Delinka, have a combined two hundred

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Speaker 3: and sixteen seats in the parliament, so they have over

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Speaker 3: a third. Now Frederick Mert will have the option to

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Speaker 3: temporarily lift some of these debt limits, has been done

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Speaker 3: in crisis areas in the past. That doesn't change the

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Speaker 3: long term trajectory though too, And of course add to

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Speaker 3: this the timing issues. We know how quickly policy is

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Speaker 3: emerging out of Washington, how much that could affect Germany,

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Speaker 3: and talking about having a government in less than two

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Speaker 3: months for many people's feels like a very long time.

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Speaker 5: Yeah.

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Speaker 2: Absolutely, Look, it's a very very interesting moment, isn't it. Stephen.

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Speaker 2: So good to have you with us this morning live

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Speaker 2: from Berlin covering the election results, you know, perhaps the

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Speaker 2: most important election results, certainly this year and in many

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Speaker 2: decades for Germany. And on that point that you were

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Speaker 2: making about the debt break and defense spending, let's move

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Speaker 2: on to discuss well, one of the issues that will

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Speaker 2: be you know, the first for the German government to

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Speaker 2: need to grapple with. Ukrainian President Vlodomis Zelensky congratulated Friedrich Martz,

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Speaker 2: saying that he looked forward to working with Germany to

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Speaker 2: strengthen Europe after the election result last night. Zelensky said

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Speaker 2: over the weekend also that he would give up his

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Speaker 2: own presidency in exchange for Ukraine becoming a NATO member,

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Speaker 2: whilst also pushing back against the Trump administration's demands for

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Speaker 2: a minerals deal. Let's bring in our reporter covering Central

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Speaker 2: and Eastern Europe, Pyot Skolimowsky. On this Pyot, thank you

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Speaker 2: so much for being with us on the deal to

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Speaker 2: exploit Ukraine's natural resources Scott Bessent. He wrote in the

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Speaker 2: Ft this weekend, arguing that economic ties would provide a

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Speaker 2: security shield for Ukraine. What do we know about this

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Speaker 2: possible mineral deal?

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Speaker 8: Hi? Indeed, so the deal has been in negotiations for

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Speaker 8: several days now, several days nights. As a matter of fact,

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Speaker 8: it was first delivered by Scott Peasant in Kiev several

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Speaker 8: weeks ago, and it wasn't It was taken badly by

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Speaker 8: the Ukraine in side. Basically, what it amounts to is

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Speaker 8: that Trump administration has called for creating a kind of

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Speaker 8: a fund worth around five hundred billion dollars, which, in

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Speaker 8: US telling, would allow Ukraine to pay off the assistance

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Speaker 8: that US has provided since the start of the war.

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Speaker 8: And there was the revenue the cut from the natural

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Speaker 8: resources wealth of Ukraine will will kind of crew and

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Speaker 8: US will be will be able to grab around fifty

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Speaker 8: percent of it. It was criticized widely as a sort

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Speaker 8: of a colonial approach, and we also heard yesterday from

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Speaker 8: President Zelenski, who obviously had a long press conference in Kiev.

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Speaker 8: He pushed back against those demands. First of all, he

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Speaker 8: pushed back against this idea of against the number five

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Speaker 8: hundred billion. He says, well, actually the amount of aid

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Speaker 8: is roughly around one hundred billion and maybe less than that.

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Speaker 8: And what he also said is that it will take

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Speaker 8: he won't allow for the deal that will have to

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Speaker 8: be paid back for the next generations of Ukrainians. So

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Speaker 8: but the bottom line is the deal is in the

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Speaker 8: tar is in the making. But but both sides are

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Speaker 8: very much far apart on sort of finding a landing

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Speaker 8: zone for it at this point.

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Speaker 3: Piato, Good morning. It's Stephen in Berlin with another EU

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Speaker 3: leader summat happening this week. What should we expect to

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Speaker 3: come out of that? Will European Union leaders be able

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Speaker 3: to use Russia's seized assets?

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Speaker 8: Indeed, it's a flarer of activity. We actually already have

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Speaker 8: a foreign minister's meeting today. They called for also an

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Speaker 8: emergency meeting yesterday. We heard from President Koshta that an

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Speaker 8: emergency summit is going to happen on March the sixth. Sorry,

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Speaker 8: So the meeting today from foreign ministers is going to

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Speaker 8: lay the groundword for that. So, as you mentioned, there

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Speaker 8: is this, as we reported, there is this idea of

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Speaker 8: a deal where it will be easier for you to

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Speaker 8: grab hold of or tap the frozen assets Russian assets.

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Speaker 8: It's almost three hundred billion at this point. What's happening

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Speaker 8: is that you can use just interest on that a

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Speaker 8: cruise on those assets at this idea. At this point,

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Speaker 8: the idea would be to use those assets as a

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Speaker 8: collateral against future claims. So that's in the works. Separately,

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Speaker 8: there's also a plan for twenty billion which we also

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Speaker 8: reported and it's going probably to be announced today twenty

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Speaker 8: billion years of extra eight for Ukraine. So, as I said,

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Speaker 8: there's a flurry of activity which will lay the groundword

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Speaker 8: for the summit next week.

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Speaker 2: Indeed, and meanwhile we also expect this US UN resolution

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Speaker 2: today on peace in Ukraine, Russia may not be named

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Speaker 2: as the aggressor. Does this cement the US's view on

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Speaker 2: this conflict.

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Speaker 8: Is indeed? I mean, it was quite shocking and telling

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Speaker 8: that two of President Trump's top advisors, Pete Exit and

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Speaker 8: Mike Watts, actually as they were, were asked to name

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Speaker 8: Russia as an excess and the aggressor in the war,

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Speaker 8: and they actually declined, and sort of this is reflected

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Speaker 8: in the text of this UN resolution. So US is

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Speaker 8: pushing to block the resolution that would condemn Russia of

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Speaker 8: the war of aggression, and the draft that they are

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Speaker 8: proposing makes actually no reference to also to the principle

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Speaker 8: of Ukraine's sovereignty and turtle integrity, which is which is

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Speaker 8: shocking for allies. And and it kind of goes to

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Speaker 8: show how how this US approach has shifted, I mean

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Speaker 8: under under Biden. You know, uh, you could see that

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Speaker 8: Zelensky had farm firm support of of US, which is

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Speaker 8: still remains the main supporter in terms of at least

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Speaker 8: the military gear that's being sent to Ukraines. And we're

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Speaker 8: we're seeing a clear shift in that and and that's

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Speaker 8: obviously creates a room for for europe to to step up.

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Speaker 8: And that's why we also seeing so much action from

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Speaker 8: from you from Europeans. And you know, one encouraging sign

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Speaker 8: is probably what we heard from from Frederi Mert yesterday

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Speaker 8: when he was speaking after the the election in a

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Speaker 8: round table with other leaders of the parties, where he said, well,

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Speaker 8: we probably need to push for for certain European independence

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Speaker 8: because we're being pushed from one side by Russia the

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Speaker 8: other US. So you know, let's let's see where whether

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Speaker 8: that happens. I mean, we're obviously we need to first

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Speaker 8: see the UH the the German UH German government to

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Speaker 8: be formed, but but clearly there is a realization that

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Speaker 8: the US can no longer be ticket for granted as

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Speaker 8: a supporter of Ukraine in the future.

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Speaker 3: This is Bloomberg Daybreak Europe, your morning brief on the

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