WEBVTT - US Retail Sales, Netflix Preview 0:00:02.400 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio news. 0:00:09.360 --> 0:00:11.840 This is Bloomberg day Break Weekend, our global look at 0:00:11.840 --> 0:00:14.240 the top stories in the coming week from our Daybreak 0:00:14.240 --> 0:00:16.880 anchors all around the world, and straight ahead on the program, 0:00:16.880 --> 0:00:19.640 a look at US retail sales and what that data 0:00:19.680 --> 0:00:23.680 point may mean for Federal reserve policy moving forward. I'm 0:00:23.720 --> 0:00:24.960 Tom Busby in New York. 0:00:25.280 --> 0:00:27.400 I'm Stephen Carolyn London. But we're looking ahead to the 0:00:27.480 --> 0:00:30.600 UK's new Prime minister hosting his neighbors for a meeting 0:00:30.760 --> 0:00:32.559 of the European political community. 0:00:32.840 --> 0:00:35.280 And I'm Brian Curtis in Hong Kong. We look ahead 0:00:35.320 --> 0:00:38.159 to China's Third Plan of and whether it's steady as 0:00:38.159 --> 0:00:42.040 she goes on policy or surprising new developments. 0:00:42.440 --> 0:00:46.440 That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 0:00:46.479 --> 0:00:50.280 Eleve Them three Own New York, Bloomberg ninety nine to one, Washington, DC, 0:00:50.600 --> 0:00:54.600 Bloomberg one O six one, Boston, Bloomberg nine sixty, San Francisco, 0:00:54.880 --> 0:00:59.080 DAB Digital Radio, London, Sirius XM one nineteen and around 0:00:59.160 --> 0:01:01.800 the world on Bloemberg Radio dot com and via the 0:01:01.840 --> 0:01:03.000 Bloomberg Business App. 0:01:06.840 --> 0:01:09.319 Good day to you. I'm Tom Busby, and we begin 0:01:09.400 --> 0:01:12.920 today's program with US retail sales for June. That data 0:01:13.000 --> 0:01:15.959 out on Tuesday morning, eight thirty am Wall Street Time. 0:01:16.120 --> 0:01:19.440 And after more signs that inflation is cooling, how might 0:01:19.520 --> 0:01:22.320 that move the needle for FED policy going forward? Well, 0:01:22.360 --> 0:01:28.000 for more, we're joined by Estello, us economist with Bloomberg Economics. Well, Estelle, 0:01:28.040 --> 0:01:31.759 after two months in a row of pretty lackluster retail spending, 0:01:32.240 --> 0:01:35.000 what is your outlook for retail sales in June. 0:01:35.800 --> 0:01:40.280 We're actually expecting another month of very weak retail sales 0:01:40.319 --> 0:01:44.880 for June. We're expecting the headline retails print to print 0:01:45.000 --> 0:01:49.560 at negative zero point three percent. We're expecting the more 0:01:49.960 --> 0:01:54.320 important control group retail sales figure, that's the retail sales 0:01:54.480 --> 0:01:58.360 figure that strips out more of the volatile components of 0:01:58.720 --> 0:02:02.760 the retail sales data, to print at zero percent. So 0:02:02.800 --> 0:02:08.040 that's flat reading of retail sales. Now, the negative zero 0:02:08.120 --> 0:02:12.600 point three percent headline retail sales reading we're expecting partially 0:02:12.680 --> 0:02:16.840 reflects a really sharp decline in auto sales in the 0:02:16.840 --> 0:02:20.360 month of June. Now, part of this is reflective of 0:02:20.400 --> 0:02:22.880 the fact that a lot of auto dealers in the 0:02:22.880 --> 0:02:26.960 month of June saw a cyber attack on the software 0:02:27.040 --> 0:02:30.880 that they use to process sales, so that affected the 0:02:30.919 --> 0:02:34.559 top line sales figures we saw in June for automobiles 0:02:34.919 --> 0:02:37.800 and may not actually be reflective of a sharp pullback 0:02:37.840 --> 0:02:40.240 in consumer spending, but that's in the data. So that's 0:02:40.240 --> 0:02:43.960 why we're forecasting a negative numbering you mentioned that we've 0:02:44.000 --> 0:02:48.080 already had two consecutive months of week retail sales prints. 0:02:48.440 --> 0:02:52.600 If our forecast for the June retail sales is correct, 0:02:52.919 --> 0:02:56.040 it's going to show that consumer spending is very much 0:02:56.120 --> 0:02:59.720 a slowing trend. And what that mainly is reflecting is 0:02:59.720 --> 0:03:03.680 that consumers are very much feeling the pressure from the 0:03:03.680 --> 0:03:06.959 Federal Reserve's high interest rates. The Fed is very much 0:03:07.080 --> 0:03:10.240 waiting to have more confidence that inflation is going towards 0:03:10.280 --> 0:03:13.760 this two percent target. And how consumer spending plays into 0:03:13.800 --> 0:03:17.280 that is that as we see consumers being stressed about 0:03:17.560 --> 0:03:20.760 by high interest rates, they're pulling back spending and a 0:03:20.760 --> 0:03:24.040 lot of retailers are reacting to that by lowering prices. 0:03:24.160 --> 0:03:25.960 Why don't we talk about the prices, because we have 0:03:26.040 --> 0:03:29.000 seen airfares go down, we have seen used car prices 0:03:29.040 --> 0:03:32.720 go down. Auto insurance of course still you know significantly higher, 0:03:33.480 --> 0:03:36.320 but we did see there is some hope for consumers. 0:03:36.440 --> 0:03:39.640 We saw a significant slow down in inflation in June. 0:03:39.680 --> 0:03:41.600 Now most of that on housing costs and rents, but 0:03:41.640 --> 0:03:44.360 that's a big part of household budgets. How will that 0:03:44.440 --> 0:03:46.120 impact people spending? 0:03:46.520 --> 0:03:48.880 As health process come down, that's going to free up 0:03:48.880 --> 0:03:52.920 a little more disposable income for consumers. It's going to 0:03:52.960 --> 0:03:56.160 ease off the pressure on consumers, but overall, it's not 0:03:56.200 --> 0:03:59.640 going to change the fact that consumers are feeling a 0:03:59.680 --> 0:04:03.720 little less flushed compared to prior to the pandemic. So 0:04:04.240 --> 0:04:07.120 over the past you know, six months, consumers have been 0:04:07.240 --> 0:04:11.720 spending more than their incomes have been growing. And as 0:04:12.000 --> 0:04:15.440 the label market cools further, we're expected to consumers to 0:04:15.480 --> 0:04:18.520 feel a little more cautious about their spending, even if 0:04:18.600 --> 0:04:20.560 their other household costs are coming down. 0:04:20.800 --> 0:04:22.159 But at least there is hope. 0:04:22.240 --> 0:04:24.240 There is hope and a lot of talk now, especially 0:04:24.279 --> 0:04:28.320 after last week's inflation data, that in September, when we 0:04:28.360 --> 0:04:30.400 have a lot of back to schools spending, we have 0:04:30.480 --> 0:04:34.400 a lot of new cars coming on dealership lots that 0:04:34.520 --> 0:04:37.160 if there is a rate cut from the FED, and 0:04:37.440 --> 0:04:40.520 it was a pretty dubbish tone last week in annual 0:04:40.560 --> 0:04:43.920 testimony by Chairman Powell to Congress that we really could 0:04:44.200 --> 0:04:46.320 you know, signal a real boost for the US consumer 0:04:46.640 --> 0:04:47.840 through the end of this year. 0:04:47.920 --> 0:04:51.359 Though, well, that's not how we're looking at things right now. 0:04:51.440 --> 0:04:56.039 So basically we still have expectations for our VET cut 0:04:56.480 --> 0:05:00.799 in September. But usually if you look at his historical data, 0:05:00.960 --> 0:05:04.680 it takes time for consumers to feel confident again. If 0:05:04.680 --> 0:05:08.760 you look at the underlying drivers of consumer spending, consumers 0:05:08.839 --> 0:05:12.200 usually spend when they feel like their income can support it, 0:05:12.600 --> 0:05:16.120 and income growth is supported by a strong labor market. 0:05:16.440 --> 0:05:19.320 Right now, even if the FED cuts in September, we're 0:05:19.360 --> 0:05:22.400 still expecting labor market to slow and consumers to not 0:05:22.520 --> 0:05:27.120 feel at support from a FED cut until late twenty. 0:05:26.880 --> 0:05:30.360 Okay, Well, June retail sales data out Tuesday morning. That's 0:05:30.360 --> 0:05:33.359 ahead of Wall Street's opening bell and our thanks to Estello, 0:05:33.839 --> 0:05:37.680 us economist with Bloomberg Economics. All right, we move next 0:05:37.680 --> 0:05:41.719 to corporate earnings and streaming giant Netflix posting its latest 0:05:41.800 --> 0:05:45.159 quarterly results this Thursday. Key for investors how the companies 0:05:45.480 --> 0:05:49.400 multiple growth levers like live comedy shows, live sporting events. 0:05:49.440 --> 0:05:53.400 It's ad supported tier and subscription price hikes has impacted 0:05:53.440 --> 0:05:55.840 revenue and for all that and more. We're joined by 0:05:55.839 --> 0:06:00.760 Githa ragenathin Bloomberg Intelligence analyst on US media. Well, getha, 0:06:00.920 --> 0:06:03.160 what are you expecting to see from Netflix? 0:06:03.560 --> 0:06:03.839 Tom? 0:06:03.920 --> 0:06:06.880 We are really expecting a blockbuster quarter. So if you 0:06:07.040 --> 0:06:10.240 just look at Netflix's performance over the past few months, 0:06:10.680 --> 0:06:13.560 I would say Netflix is firing on all cylinders. The 0:06:13.600 --> 0:06:17.080 company is in the strongest position that it's ever been, 0:06:18.160 --> 0:06:21.960 I think fundamentally, I think competitively as well as financially. 0:06:22.680 --> 0:06:26.760 We continue to see very good subscriber momentum. Remember they 0:06:26.800 --> 0:06:30.479 added something like nine point three million subscribers in the 0:06:30.520 --> 0:06:34.919 first quarter. Obviously, we don't expect the same level of 0:06:34.920 --> 0:06:37.560 subscriber gains in the second quarter, but we think it's 0:06:37.560 --> 0:06:39.080 going to be fairly strong. We think it's going to 0:06:39.120 --> 0:06:41.240 be close to almost six million. And that's on the 0:06:41.279 --> 0:06:43.839 back of a lot of initiatives that the company has introduced. 0:06:43.880 --> 0:06:47.720 So they have this widespread password crackdown, and of course 0:06:47.760 --> 0:06:50.880 they have this new ad supported tier, which we think 0:06:50.880 --> 0:06:52.640 has been working really well for them. 0:06:52.800 --> 0:06:56.040 And are the subscriber adds global? How are they doing 0:06:56.040 --> 0:06:57.920 in the US and how are they doing elsewhere? 0:06:58.680 --> 0:07:02.719 They're actually surprisingly strong tom in the US. And remember 0:07:02.720 --> 0:07:05.719 the US is a fairly saturated market, and we're still 0:07:05.760 --> 0:07:10.360 seeing pretty pretty good growth. Remember Netflix now actually at 0:07:10.400 --> 0:07:14.760 about eighty million subscribers, actually has more subscribers than the 0:07:14.800 --> 0:07:19.280 traditional TV bundles. So Netflix has very much become the 0:07:19.480 --> 0:07:22.680 go to option, and if you're thinking about TV viewing, 0:07:22.760 --> 0:07:25.760 Netflix really is the first choice and is the anchor 0:07:25.880 --> 0:07:29.280 I would say for most consumers when it comes to 0:07:29.280 --> 0:07:31.640 the living room. So we're seeing very good growth in 0:07:31.680 --> 0:07:33.960 the US, given that it's a saturated market, but obviously 0:07:34.080 --> 0:07:37.720 majority of the growth still comes from the international markets. 0:07:38.560 --> 0:07:42.200 And let's talk about some of these newer initiatives from Netflix. 0:07:42.560 --> 0:07:44.720 Christmas Day may never be the same again, right with 0:07:45.160 --> 0:07:49.680 this deal to stream live NFL games, And we saw 0:07:49.720 --> 0:07:53.600 this John Mulaney, Everyone's in LA five or six live shows, 0:07:53.600 --> 0:07:58.240 comedy shows. It's all about something Netflix has never done before, right, 0:07:58.400 --> 0:07:59.720 Advertising revenue. 0:08:00.640 --> 0:08:04.680 Oh absolutely, I mean this is where I think investors 0:08:04.680 --> 0:08:08.280 are getting really really excited about the future potential for 0:08:08.360 --> 0:08:12.000 this company, because we know subscription growth, we know they've 0:08:12.040 --> 0:08:16.160 really kind of delivered on subscription growth, but advertising is 0:08:16.200 --> 0:08:19.040 a whole new area for them, and they are really 0:08:19.120 --> 0:08:22.560 doing things to kind of really boost that revenue. So 0:08:23.200 --> 0:08:26.200 they've moved into live event sports programming. 0:08:25.720 --> 0:08:27.960 In a huge way, obviously with this NFL deal. 0:08:28.560 --> 0:08:32.640 Obviously that's going to be something very very attractive to advertisers, 0:08:32.760 --> 0:08:38.760 especially since the advertising subscription tier is priced very economically, 0:08:38.840 --> 0:08:41.040 very competitively at seven dollars a month, So we think 0:08:41.080 --> 0:08:43.480 a lot of people will sign on. And they're doing 0:08:43.480 --> 0:08:45.360 lots of different things, as you just pointed out, obviously 0:08:45.400 --> 0:08:46.160 the comedy shows. 0:08:46.160 --> 0:08:47.560 You had the Tom Brady roast. 0:08:48.320 --> 0:08:51.200 You know, we have a Mike Tyson Versus Jake Paul 0:08:51.280 --> 0:08:53.840 event that is coming up sometime in November. So they're 0:08:53.880 --> 0:08:57.079 doing a lot of things in terms of content, really 0:08:57.120 --> 0:09:01.120 kind of broadening their content appeal quite aggressively. 0:09:01.800 --> 0:09:03.960 And when I turn on Netflix, which I have at home, 0:09:04.080 --> 0:09:07.200 I see a lot more international shows and some of 0:09:07.200 --> 0:09:10.080 them have been tremendous hits here in the US, whatever 0:09:10.160 --> 0:09:14.959 language they're in. It's incredible how this growth is everywhere. 0:09:16.160 --> 0:09:20.240 Oh absolutely, And you know that is translating into revenue growth, 0:09:20.240 --> 0:09:23.600 that is translating into subscriber growth, but most importantly, Tom, 0:09:23.920 --> 0:09:27.280 that is translating into engagement. And really this is something 0:09:27.320 --> 0:09:30.120 that Netflix has been driving home now for so many quarters, 0:09:30.120 --> 0:09:33.040 so many years. They want to see people come to 0:09:33.120 --> 0:09:36.080 their platform and then never leave the platform, because that 0:09:36.240 --> 0:09:39.280 is how they can get to upsell so many more 0:09:39.559 --> 0:09:43.040 you know, new products, whether it's gaming, whether it's advertising, 0:09:43.559 --> 0:09:45.760 as they kind of expand into new categories. And we're 0:09:45.760 --> 0:09:49.000 seeing that engagement is very very strong for Netflix, and 0:09:49.040 --> 0:09:52.280 of course a lot of local language content is definitely helping. 0:09:52.320 --> 0:09:55.320 So just in the second quarter, we saw you know, 0:09:55.360 --> 0:09:58.520 of course, Bridgerton was the most watched show, but we 0:09:58.559 --> 0:10:01.240 also saw some of you know, the Korean language dramas 0:10:01.320 --> 0:10:05.400 Queen of Tears for instance, performing very very well, and 0:10:05.440 --> 0:10:07.520 we're probably going to see more of that as Quid Game. 0:10:07.559 --> 0:10:09.560 The second season of Squid Game comes out a little 0:10:09.600 --> 0:10:10.440 bit later this year. 0:10:11.200 --> 0:10:13.840 Now, also, Netflix, the success of all these shows, the 0:10:14.000 --> 0:10:17.000 success you know, the revenue streams they have, it has 0:10:17.080 --> 0:10:21.319 forced other streamers to look for partnerships just to compete 0:10:21.840 --> 0:10:23.880 even close to the level of Netflix. 0:10:24.480 --> 0:10:27.960 Yeah, and that actually works so well for for Netflix, 0:10:28.040 --> 0:10:31.920 tom because you know, obviously, originally they were investing very 0:10:32.000 --> 0:10:34.679 very heavily in you know, their own content, with what 0:10:34.720 --> 0:10:37.640 we call original content. But now we're seeing a much 0:10:37.720 --> 0:10:40.600 more kind of balanced mix, and when they go for 0:10:40.720 --> 0:10:44.160 more licensed content, we see the effects in terms of 0:10:44.640 --> 0:10:47.960 the bottom line because it's it's much cheaper, you know, 0:10:48.040 --> 0:10:50.240 it's it's content that kind of travels well. It is 0:10:50.280 --> 0:10:54.400 time tested content, and obviously we're seeing free cash flow 0:10:54.520 --> 0:10:57.960 and operating profit get a huge boost from them being 0:10:58.080 --> 0:11:01.720 far more rational when it comes to content costs. So 0:11:01.800 --> 0:11:03.960 it's really kind of not only helping them kind of 0:11:04.000 --> 0:11:07.760 build their competitive mode getting all these content titles from 0:11:07.840 --> 0:11:10.960 other producers of content, but it is also kind of 0:11:11.040 --> 0:11:13.440 helping them actually strengthen their bottom line. 0:11:14.160 --> 0:11:16.600 It's big in a bottom line. Those shares of Netflix 0:11:16.679 --> 0:11:19.520 up about forty percent so far this year. Where do 0:11:19.559 --> 0:11:22.320 you think it heads for the remainder of twenty twenty four. 0:11:23.120 --> 0:11:26.160 So I think, you know, we're going to see continued 0:11:26.200 --> 0:11:27.800 momentum and we're seeing. 0:11:27.520 --> 0:11:29.280 That with on the subscriber side. 0:11:29.320 --> 0:11:32.520 But I think the real big catalyst that could potentially 0:11:32.640 --> 0:11:35.400 happen in the second half of the year is a 0:11:35.440 --> 0:11:38.360 price increase. So we have not seen Netflix increase their 0:11:38.400 --> 0:11:42.199 prices on the standard tier, which is the fifteen dollars 0:11:42.240 --> 0:11:45.880 fifty cent standard product that they offer in the United States. 0:11:45.920 --> 0:11:47.960 We haven't seen them increased prices on that tier now 0:11:48.000 --> 0:11:50.640 for almost about two years, so they're definitely due for 0:11:50.679 --> 0:11:53.600 a price increase. And we've seen price increases across the board. 0:11:53.600 --> 0:11:56.200 We've seen it at Spotify, We've seen it, you know, 0:11:56.240 --> 0:11:59.559 at Max, a lot of the rival services are increasing 0:12:00.120 --> 0:12:04.040 you know, prices. So just kind of given Netflix's low 0:12:04.160 --> 0:12:07.160 rates of churn, we definitely think that they are going 0:12:07.200 --> 0:12:09.840 to raise their prices very soon. And as we see 0:12:09.880 --> 0:12:12.480 you know, those price increases returned to kind of the 0:12:12.520 --> 0:12:16.720 normal cadence. Netflix obviously then has ample room to sustain 0:12:16.960 --> 0:12:21.280 double digit annual revenue growth and obviously huge levels of 0:12:21.320 --> 0:12:22.560 operating margin expansion. 0:12:22.880 --> 0:12:23.240 Well. 0:12:23.600 --> 0:12:27.079 Earnings for second quarter out this Thursday for Netflix. Our 0:12:27.080 --> 0:12:31.800 thanks to Getha raghanoffin Bloomberg Intelligence analysts on US media. 0:12:31.920 --> 0:12:34.160 Coming up on Bloomberg day Break weekend, we look ahead 0:12:34.160 --> 0:12:37.560 to the UK's new Prime Minister hosting his neighbors for 0:12:37.600 --> 0:12:41.000 a meeting of the European political community. I'm Tom Busby, 0:12:41.120 --> 0:12:55.400 and this is Bloomberg. This is Bloomberg day Break Weekend, 0:12:55.480 --> 0:12:57.960 our global look ahead at the top stories for investors 0:12:58.000 --> 0:13:00.600 in the coming week. I'm Tom Busby in New York. 0:13:01.000 --> 0:13:02.960 Up later on our program, we look ahead to a 0:13:03.040 --> 0:13:06.520 major policy meeting for top officials in China, but first, 0:13:06.880 --> 0:13:10.200 the European Political Community Meeting takes place in the UK 0:13:10.320 --> 0:13:13.560 this week, as Keir Starmer, the country's newly elected Prime Minister, 0:13:14.160 --> 0:13:17.360 brings dozens of high level lawmakers from across Europe together 0:13:17.440 --> 0:13:22.000 discussing shared challenges like Russia's war against Ukraine illegal immigration, 0:13:22.280 --> 0:13:25.960 even as many of those leaders face political challenges in 0:13:26.000 --> 0:13:28.679 their own countries. For more, let's go to London and 0:13:28.720 --> 0:13:31.640 bring in Bloomberg Daybreak Europe anchor Stephen Carroll. 0:13:32.160 --> 0:13:34.800 Tom In only his second week as Prime Minister, Keir 0:13:34.840 --> 0:13:37.960 Starmer will host European leaders at Blenham Palace for the 0:13:38.040 --> 0:13:41.880 fourth European Political Community Meeting. The EPCs a forum for 0:13:41.920 --> 0:13:45.280 European Union countries and their neighbors to meet. It's twice 0:13:45.360 --> 0:13:48.400 yearly gatherings are hosted alternately by a country that's in 0:13:48.480 --> 0:13:51.880 the EU and one that isn't. Choosing the Oxfordshire stately 0:13:51.960 --> 0:13:54.800 home as the backdrop for these discussions may itself be 0:13:54.800 --> 0:13:58.079 an indication of Starmer's in tensions. Known as the birthplace 0:13:58.120 --> 0:14:00.520 of Winston Churchill, the Prime Minister may be hoping to 0:14:00.600 --> 0:14:04.960 draw inspiration from Britain's revered wartime leader. The plight of 0:14:05.080 --> 0:14:07.880 Ukraine is likely to be high on the agenda in discussions, 0:14:07.960 --> 0:14:11.440 especially following the Russian bombing of a children's hospital in Kiev, 0:14:11.960 --> 0:14:15.360 but domestic tensions in other countries may overshadow these talks. 0:14:15.400 --> 0:14:18.800 In France, President Macron remains in a vulnerable position after 0:14:18.840 --> 0:14:22.280 his Centrist alliance lost its relative majority in the country's 0:14:22.320 --> 0:14:26.200 recent parliamentary elections. In Germany, Chancellor Olaf Schultz's position has 0:14:26.240 --> 0:14:29.240 been weakened by a bruising defeat in last months European 0:14:29.320 --> 0:14:32.760 Parliament vote. In fact, Kirs Starmer cuts a rare figure 0:14:32.760 --> 0:14:35.040 in Europe as a leader with a clear mandate and 0:14:35.240 --> 0:14:39.120 majority ready to implement his agenda. The UK Prime Minister's 0:14:39.120 --> 0:14:41.480 approach to foreign and defense policy is something that we've 0:14:41.480 --> 0:14:45.120 been discussing with Jamie She, associate fellow at Chatham House 0:14:45.160 --> 0:14:48.280 and a former NATO official. He started by offering his 0:14:48.400 --> 0:14:51.960 thoughts on Kiir Starmer's assertion that Ukraine can use British 0:14:52.000 --> 0:14:54.480 missiles to strike targets inside Russia. 0:14:54.840 --> 0:14:57.840 Well, I think it's obviously good news for President's Vilenski 0:14:57.920 --> 0:15:01.080 because clearly at the time when Theussians have been massing 0:15:01.080 --> 0:15:04.000 their forces just on their side of the border for 0:15:04.440 --> 0:15:07.400 their offensives which have been taking place as you can 0:15:07.440 --> 0:15:11.360 see in the Dombas region up near Kharkiv. If Ukraine 0:15:11.400 --> 0:15:13.600 is going to really be able to defend itself, it 0:15:13.640 --> 0:15:16.360 has to be able to strike the Russian fuel dumps, 0:15:16.760 --> 0:15:20.520 the Russian storage facilities, their command and control, their communications, 0:15:20.840 --> 0:15:25.880 their headquarters on Russian territory to disrupt their offensive preparations. 0:15:26.320 --> 0:15:30.600 Ukraine has also had some success in attacking Russian airfields, 0:15:30.880 --> 0:15:35.000 taking out some Russian strategic bombers very far away from 0:15:35.000 --> 0:15:38.320 the Russian Ukraine border, and also those Russian fuel and 0:15:38.440 --> 0:15:41.600 energy facilities that I was referring to earlier. So I 0:15:41.600 --> 0:15:44.680 think Kairstarma has given President of Lanski a shot of 0:15:44.720 --> 0:15:47.160 the arms to the extent and obviously, if Russia believes 0:15:47.200 --> 0:15:49.960 it has full license from Russia to attack anything it 0:15:50.080 --> 0:15:53.160 likes in Ukraine, the Ukrainian's cause of self defense have 0:15:53.240 --> 0:15:56.360 to be able to strike back against the significant Russian 0:15:56.360 --> 0:15:59.280 military targets, but obviously not Russian civilian targets. I think 0:15:59.400 --> 0:16:02.520 Kiyostarma and other NATO leaders will draw a redline on 0:16:02.600 --> 0:16:06.000 that the strikes have to be against the genuine military targets. 0:16:06.800 --> 0:16:09.480 Does this though, on the question of striking military targets 0:16:09.520 --> 0:16:12.480 open up divisions between the US and what France and 0:16:12.520 --> 0:16:14.960 the UK are now saying about the use of weapons 0:16:15.000 --> 0:16:17.080 to strike military targets inside Russia. 0:16:18.280 --> 0:16:21.080 Well, since the beginning of the war, the Europeans have 0:16:21.160 --> 0:16:24.960 often been out ahead of the United States in minery space. 0:16:25.040 --> 0:16:29.400 For example, they decided the UK to provide tanks first, 0:16:29.480 --> 0:16:32.560 a long time before the United States decided to do 0:16:32.600 --> 0:16:35.440 the same. Similarly, with these long range artillery, these cruise 0:16:35.480 --> 0:16:39.440 missilesy storm Shadows or the French scalps that we're talking 0:16:39.480 --> 0:16:43.920 about now, the Europeans, with the Dutch and Danes, were 0:16:43.920 --> 0:16:45.720 the first two across the Rubican when it came to 0:16:45.840 --> 0:16:49.280 S sixteen aircraft, and the United States followed. So there 0:16:49.320 --> 0:16:52.200 is often in NATO perception that it's always the Americans 0:16:52.200 --> 0:16:54.360 who are out in front and the Europeans sort of 0:16:54.400 --> 0:16:58.280 follow willy nilly sooner or later. But this time it 0:16:58.320 --> 0:17:00.840 is the other way. But the fact of the matter 0:17:00.920 --> 0:17:03.120 is that Biden has also recently shown a little bit 0:17:03.120 --> 0:17:08.480 of flexibility, allowing the Ukrainians to use the long range 0:17:08.800 --> 0:17:13.040 US attackers artillery shells against the targets on Russian territory, 0:17:13.160 --> 0:17:15.080 but Biden has said that he doesn't want these to 0:17:15.119 --> 0:17:17.720 go too deep into Russia. He wants them really to 0:17:17.800 --> 0:17:21.560 be restricted to places like Crimea and just those Russian 0:17:21.560 --> 0:17:25.480 facilities over the border preparing for the offensive which I 0:17:25.520 --> 0:17:27.760 was referring to earlier. So the United States is sort 0:17:27.760 --> 0:17:30.080 of halfway there, but it tends to sort of follow 0:17:30.080 --> 0:17:31.560 where the Europeans lead on this. 0:17:31.480 --> 0:17:34.960 One, right, So the big takeaway so far is that 0:17:35.000 --> 0:17:38.160 these NATA allies have promised those five long range air 0:17:38.160 --> 0:17:42.480 defense systems for Ukraine. But is NATO actually doing enough 0:17:42.560 --> 0:17:43.760 for Ukraine to win the war? 0:17:45.840 --> 0:17:50.440 Well, maybe not enough in the past, because the effort 0:17:50.640 --> 0:17:56.879 was largely left to individual allies acting bilaterally, signing bilateral 0:17:56.920 --> 0:18:00.679 agreements with Ukraine like the one that Rishie sunakas very 0:18:00.720 --> 0:18:04.640 early on with a Kiev and basically giving the Ukrainians 0:18:04.680 --> 0:18:06.720 what they have in their stocks, not always what the 0:18:06.840 --> 0:18:09.720 Ukrainians need on a priority basis. But NATO is now 0:18:09.760 --> 0:18:12.000 stepping up, and I think the big headline from this 0:18:12.200 --> 0:18:15.960 Washington summit is that maybe too late, but still NATO 0:18:16.119 --> 0:18:18.440 is now going to set up a command in Wisbaden 0:18:18.520 --> 0:18:22.320 in Germany with about eight hundred NATO military planners whose 0:18:22.400 --> 0:18:24.920 job it will be now to make this a much 0:18:24.960 --> 0:18:29.320 more coordinated, organized, planned effort. For example, Ukraine is currently 0:18:29.359 --> 0:18:31.960 operating about one hundred and forty different types of weapons 0:18:31.960 --> 0:18:35.280 systems supplied by the West. This doesn't make sense because 0:18:35.320 --> 0:18:38.400 it means one hundred and forty different supply chains, maintenance 0:18:38.440 --> 0:18:41.399 systems and so on doesn't help the Ukrainian war effort. 0:18:41.480 --> 0:18:43.520 So I think what NATO is going to do now 0:18:43.680 --> 0:18:46.600 is organized this better in terms of what Ukraine needs, 0:18:47.080 --> 0:18:50.160 ensure that the delivery is more timely and more consistent, 0:18:50.480 --> 0:18:52.880 reduced these one hundred and forty different systems to say 0:18:52.880 --> 0:18:56.280 twenty or thirty which Ukraine could actually maintain and operate. 0:18:56.600 --> 0:18:58.960 And what NATO says also is that this effort is 0:18:59.000 --> 0:19:02.200 going to be a bridge to a future Ukrainian membership 0:19:02.240 --> 0:19:04.240 of the Alliance, because it's not just going to be 0:19:04.240 --> 0:19:07.280 about the short term provision of weapons to Ukraine. It's 0:19:07.320 --> 0:19:09.800 going to also be about the long term restructuring of 0:19:09.840 --> 0:19:12.600 the Ukrainian army to look less like an old Soviet 0:19:12.720 --> 0:19:15.960 army and more like a modern Western army able to 0:19:16.080 --> 0:19:19.040 integrate into NATO in the fullness of time. 0:19:19.600 --> 0:19:22.399 That was Jamie shaef Fro Chatham House speaking to Jamani 0:19:22.440 --> 0:19:25.399 Brassacci and me on Bloomberg Radio. So what's in store 0:19:25.440 --> 0:19:28.440 at this upcoming European political community meeting and will ker 0:19:28.480 --> 0:19:32.000 Starmer be able to charm his EU counterparts into a 0:19:32.080 --> 0:19:35.520 closer relationship. I've been discussing this and more with Bloomberg's 0:19:35.600 --> 0:19:38.880 UK Politics editor Alex morales. I started by asking him 0:19:38.880 --> 0:19:42.159 what Kir Starmer may be hoping to achieve during this event. 0:19:42.960 --> 0:19:45.320 Well, mindful that he's just coming back from the NATO 0:19:45.320 --> 0:19:47.080 summit where he's met a lot of the same people. 0:19:47.280 --> 0:19:50.840 I mean, this really is about sort of meeting a 0:19:50.840 --> 0:19:52.679 lot of the European leaders who will be working with 0:19:52.760 --> 0:19:54.720 he hopes for the next five or ten years, but 0:19:54.880 --> 0:19:57.520 head to head, face to face, discussing some of the 0:19:57.560 --> 0:19:59.719 issues that they have in common, so you know, some 0:19:59.760 --> 0:20:02.480 of their points of divergence. And he really wants to 0:20:02.560 --> 0:20:05.560 change the tone in the way that the UK develops 0:20:05.600 --> 0:20:08.679 its relationship with the European Union and other more wider 0:20:08.960 --> 0:20:09.760 European countries. 0:20:09.880 --> 0:20:11.639 How much of a test there's going to be for 0:20:11.760 --> 0:20:14.119 him in his new job as Prime Minister it's his 0:20:14.119 --> 0:20:16.800 first time hosting such an international summer and it's quite 0:20:16.840 --> 0:20:19.320 a lot of you know, as you say, friends and neighbors, it's. 0:20:19.280 --> 0:20:20.840 Quite a lot of leaders. But it's also a sort 0:20:20.840 --> 0:20:24.320 of quite fairly informal summit. They don't have a set 0:20:24.359 --> 0:20:26.840 communicate that they want to agree, so he doesn't have 0:20:26.840 --> 0:20:28.359 a piece of paper that he needs to achieve by 0:20:28.359 --> 0:20:29.040 the end of it. 0:20:29.040 --> 0:20:30.160 It really is just. 0:20:30.119 --> 0:20:32.560 About, you know, getting that time to speak face to 0:20:32.560 --> 0:20:35.480 face with other leaders and to discuss all these different 0:20:35.520 --> 0:20:36.800 issues that they need to address. 0:20:36.920 --> 0:20:38.320 And this is one of the things that of course 0:20:38.320 --> 0:20:40.280 we know as a priority for the new Labor government. 0:20:40.320 --> 0:20:43.359 They want better ties with the European Union versus what 0:20:43.400 --> 0:20:46.680 there was under the Conservatives. Does this perhaps provide an 0:20:46.680 --> 0:20:49.760 opening for care Starmor to make progress on some key issues. 0:20:49.920 --> 0:20:51.840 Yeah, I mean definitely think. I don't think we'll be 0:20:51.880 --> 0:20:53.760 getting any sort of firm agreements out of it, but 0:20:54.240 --> 0:20:56.320 clearly so one of the big things he wants to 0:20:56.359 --> 0:20:58.359 talk about. We know that he's going there with this 0:20:58.400 --> 0:21:01.320 sort of proposal for fence and security packed with the 0:21:01.359 --> 0:21:04.639 European Union, so yes, he wants to tighten those ties. 0:21:04.640 --> 0:21:06.639 But obviously there are a lot of issues like immigration 0:21:07.640 --> 0:21:10.199 he wants to talk about. It's not free movement, but 0:21:10.320 --> 0:21:14.720 he wants to help, for instance, British performing artists to 0:21:14.800 --> 0:21:16.840 be able to tour more freely in Europe. There are 0:21:16.880 --> 0:21:19.600 all these sort of issues which have risen up since 0:21:19.640 --> 0:21:23.000 Brexit where the relationship could just be a lot easier 0:21:23.359 --> 0:21:24.159 and better flowing. 0:21:24.480 --> 0:21:27.639 And how much does there has there been sort of 0:21:27.640 --> 0:21:29.560 a tone shift or could there be a tone shift 0:21:29.640 --> 0:21:32.720 from the other side of the channel from the closer 0:21:32.760 --> 0:21:36.119 European partners towards a new government given that it is 0:21:36.240 --> 0:21:40.080 a different party and sort of a fairly significant step 0:21:40.119 --> 0:21:41.480 on from Braxit as well. 0:21:41.880 --> 0:21:45.840