WEBVTT - France Averts Shutdown, US Sanctions EU Tech Lawmaker, Brevan Howard's Exit  

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>This is the Bloomberg daybec podcast. Good morning, It's Wednesday,

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<v Speaker 2>the twenty fourth of December. I'm Caroline Hepga in London.

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<v Speaker 2>Coming up today. France passes a stopgap bill to keep

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<v Speaker 2>the state running. Debate on the budget resumes in January.

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<v Speaker 2>The US sanction's former EU officials in an escalating clash

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<v Speaker 2>over free speech and big tech, and the co founder

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<v Speaker 2>of Brevan Howard, billionaire Alan Howard has left the UK

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<v Speaker 2>to live in Switzerland. Let's start with a roundup of

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<v Speaker 2>our top stories. France has adopted a stopgap budget bill

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<v Speaker 2>for twenty twenty six to avoid a government shutdown. The

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<v Speaker 2>so called spiciale or special law, allows the state to

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<v Speaker 2>continue collecting taxes and borrowing money despite the lack of

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<v Speaker 2>a full budget. Effectively, it rolls over fiscal plans into

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<v Speaker 2>the new year. Addressing the Nation or French television, Prime

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<v Speaker 2>Minister Sebastia Locornu explained the situation.

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<v Speaker 1>Taking the time to discuss a budget in a democracy

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<v Speaker 1>like France is not a weakness. In the meantime, a

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<v Speaker 1>special law is being discussed in parliament. It will allow

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<v Speaker 1>us to continue to collect taxes and keep public services

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<v Speaker 1>going from January first. That doesn't mean it's a budget

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<v Speaker 1>and there will be a number of negative consequences if

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<v Speaker 1>the situation continues.

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<v Speaker 2>That was the French Prime Minister Sebastia Lecornu speaking Vira

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<v Speaker 2>translator ahead of the National Assembly's decision. The temporary legislation

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<v Speaker 2>comes after the government warned that the parts of the

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<v Speaker 2>finance bill that had been agreed so far would only

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<v Speaker 2>bring down France's deficit to five point three percent of

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<v Speaker 2>economic output in twenty twenty six, so lowering it a

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<v Speaker 2>tenth of one percent versus this year. The National Assembly

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<v Speaker 2>is set to assume debate on the full French budget

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<v Speaker 2>in early January. Now, the Trump administration has imposed visa

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<v Speaker 2>sanctions on former EU Commissioner Tierre Breton as a punishment

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<v Speaker 2>for his work regulating big tech. The US Sector of

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<v Speaker 2>State Marco Rubio announced the move on social media, accusing

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<v Speaker 2>Briton of extra territorial censorship.

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<v Speaker 3>The US State.

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<v Speaker 2>Department is also targeted for other people leading organizations that

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<v Speaker 2>are focused on digital hate speech encountering extremism. The Global

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<v Speaker 2>Disinformation Index, in a statement, called the US sanctions an

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<v Speaker 2>authoritarian attack on free speech and an egregious act of

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<v Speaker 2>government censorship. In a social media post, Breha, who was

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<v Speaker 2>also the former CEO of Orange and Atos, responded by

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<v Speaker 2>asking whether the US is returning to McCarthyism of the

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<v Speaker 2>nineteen fifties. Now gold has risen above four thousand, five

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<v Speaker 2>hundred dollars and ounce for the first time, while silver

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<v Speaker 2>and platinum also advances to two records. Precious metals are

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<v Speaker 2>ending this year with gains not seen in decades. Blueberg's

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<v Speaker 2>Metals reporter Martin Richie says global uncertainty has helped to

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<v Speaker 2>drive the rally.

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<v Speaker 4>You know, you can never imagine prices at this level

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<v Speaker 4>even two years ago, but here we are. And I

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<v Speaker 4>think this December rally that you've seen in gold and

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<v Speaker 4>in the precious metals is really king a continuation of

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<v Speaker 4>the same themes we've seen throughout this year. It's about

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<v Speaker 4>the debasement trade, growing sort of mistrust in traditional assets

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<v Speaker 4>a sovereign bonds and currencies. It's a bit the weaker dollar.

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<v Speaker 4>It's about central banks buying gold because of those things.

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<v Speaker 2>Richie adds that traders are now betting the US Federal

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<v Speaker 2>Reserve will lower the cost of borrowing again next year,

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<v Speaker 2>which would be a tailwind for non yielding precious metals.

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<v Speaker 2>Gold spot price this morning four four hundred and eighty

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<v Speaker 2>four dollars flat. Currently, the US economy expanded at the

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<v Speaker 2>fastest pace in two years. According to data release on Tuesday,

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<v Speaker 2>a real GDP increased at a four point three percent

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<v Speaker 2>annualized pace in the third quarter. Economists had expected growth

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<v Speaker 2>of just three point three percent. The surprise has pushed

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<v Speaker 2>up treasury yields as traders factor in the resilient consumer spending.

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<v Speaker 2>The data had been delayed due to the US government shutdown. Now,

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<v Speaker 2>BP has agreed to sell a majority stake in its

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<v Speaker 2>Castro unit to the investment firm Stone Peak Partners. Under

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<v Speaker 2>the deal, BP will get about six billion dollars for

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<v Speaker 2>a sixty five percent stake in the lubricants business. The

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<v Speaker 2>all major had planned to divest twenty billion dollars of

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<v Speaker 2>assets by the end of twenty twenty seven to improve

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<v Speaker 2>its balance sheet. It comes as Meg O'Neal prepares to

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<v Speaker 2>take the helm of BP in April after running Australia's

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<v Speaker 2>Woodside Energy. One of the co founders of Brevan Howard

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<v Speaker 2>Asset Management has left the UK, adding to concern about

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<v Speaker 2>the exodus of Britain's wealthy. Alan Howard has a net

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<v Speaker 2>worth of roughly four point three billion dollars and, according

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<v Speaker 2>to a Bloomberg analysis of regulatory filings, now lives in Switzerland.

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<v Speaker 2>Bloomberg's James Walcock has more.

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<v Speaker 5>This year, Switzerland voted to reject a fifty percent inheritance tax,

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<v Speaker 5>while Britain expanded its version of the levy. Alan Howard

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<v Speaker 5>may have followed the incentives. The Brevan Howard co founder

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<v Speaker 5>declined to comment to Bloomberg for the story, but the

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<v Speaker 5>billionaire now joins the ranks of many of the financial elite.

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<v Speaker 5>We have reported on Leaving the UK that exodus is

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<v Speaker 5>a worrying trend for the government as it is banking

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<v Speaker 5>on higher tax revenue and growth from the wealthy for

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<v Speaker 5>its economic agenda in London.

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<v Speaker 6>James Walcock, Bloomberg Radio.

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<v Speaker 2>The release of the so called EBSTCEN files has so

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<v Speaker 2>far failed to satisfy the US public. The US Department

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<v Speaker 2>of Justice has released thousands of pages of heavily redacted

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<v Speaker 2>records and photos related to the convicted sex offender in

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<v Speaker 2>the past week, but the document dump has drawn criticism

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<v Speaker 2>for missing a December nineteenth deadline and for the heavy redactions.

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<v Speaker 2>President Trump says the saga is unfairly tarnishing individuals.

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<v Speaker 7>A lot of people are very angry that pictures are

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<v Speaker 7>being released of other people that really had nothing to

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<v Speaker 7>do with Epstein, but they're a picture with him because

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<v Speaker 7>he was at a party, and you ruin a reputation

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<v Speaker 7>of somebody.

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<v Speaker 6>But I never went there, but a lot of people did.

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<v Speaker 2>Go there, President Trump speaking, They're doing a news conference

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<v Speaker 2>last night. Included in the late dispatch of release fars

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<v Speaker 2>As an email sent from an individual named AA saying

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<v Speaker 2>they are at the British War Family's Balmoral residents and

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<v Speaker 2>asking Epstein associate Gilaine Maxwell for quote inappropriate friends. In October,

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<v Speaker 2>Andrew Mountbatten Windsor, formerly a Prince and the Duke of York,

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<v Speaker 2>lost his titles following scrutiny over his links with Epstein.

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<v Speaker 2>Those are some of our top news stories today. Let's

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<v Speaker 2>look at the markets. So it's a shorter trading day.

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<v Speaker 2>Fewer markets are open across at Europe, but London is

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<v Speaker 2>trading forty one hundred is down two tenths of one percent.

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<v Speaker 2>The US socks at six hundred overall just about in

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<v Speaker 2>positive territory. US DOOP futures, though fading down a tenth

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<v Speaker 2>of one percent, very light trading volumes at the end

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<v Speaker 2>of what has been a really stelly year for US

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<v Speaker 2>and European stocks. Third year of US SOOX six hundred

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<v Speaker 2>gains up sixteen percent over all, so global stocks climbing

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<v Speaker 2>to a record high at the end of this year.

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<v Speaker 2>Ten year treasury yields have been consolidating around four sixteen,

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<v Speaker 2>so UK yields at four point fifty two. As for

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<v Speaker 2>those precious metal prices, gold four thousand, four hundred and

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<v Speaker 2>eighty six dollars, Bitcoin is down a percent and breakthrough

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<v Speaker 2>at sixty two dollars forty five. So that's a look

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<v Speaker 2>at the markets. In a moment, we'll get into the

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<v Speaker 2>story about France's budget and what to expect from central

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<v Speaker 2>banks next year and other stories caught my eye. Though

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<v Speaker 2>today I wonder whether you'll read this five top tables.

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<v Speaker 2>It's a column from Bloomberg Pursuits. And we may not

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<v Speaker 2>have even eaten pigs in blankets yet for Christmas in

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<v Speaker 2>the UK, but already there are lots of ideas about

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<v Speaker 2>how you can eat well in the city that prides

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<v Speaker 2>itself on doing hogmanat that is New Ye's Eve to you,

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<v Speaker 2>and I really like nowhere else is Edinburgh, of course,

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<v Speaker 2>and among the lists that the team have compiled, I'll

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<v Speaker 2>mention a few Cafe Carlton Dults in Leith and makers

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<v Speaker 2>Mash in the Old Town.

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<v Speaker 3>In Edinburgh.

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<v Speaker 2>The food scene, especially in the Port of Leath near Edinburgh,

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<v Speaker 2>is really growing because of quality seafood availability, our own

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<v Speaker 2>spoil the rest of what is revealed about the best

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<v Speaker 2>places to eat in Edinburgh. But perhaps if you're headed

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<v Speaker 2>to the raw Marles sometime soon, maybe you'll take a look,

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<v Speaker 2>maybe perhaps for a New Year's Eve.

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<v Speaker 3>Care who knows. But let's think about what's happening in France.

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<v Speaker 2>First, the National Assembly voted on this special law on Tuesday,

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<v Speaker 2>so this is to roll over the twenty twenty five budgets.

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<v Speaker 2>President Macro's putting pressure on Prome Minister Saci Corney to

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<v Speaker 2>have a budget by the end of January. Joining us now,

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<v Speaker 2>it's Blimberg's economist Jehan dalbar Jean. Thank you so much

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<v Speaker 2>for speaking to us today in terms of this emergency law.

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<v Speaker 2>So you know, the last bit of decision making by

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<v Speaker 2>lawmakers what does it actually do.

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<v Speaker 8>So, yes, a special is basically a temporary, narrow version

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<v Speaker 8>of the budget, not to have a kind of U

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<v Speaker 8>style government shutdown in France. Basically, a special let allows

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<v Speaker 8>the public administration to run basic operational expenditures and to

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<v Speaker 8>borrow in the market, which is quite important.

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<v Speaker 6>Altho, it's quite complicated to be.

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<v Speaker 8>Very precise on its cop but just because it's the

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<v Speaker 8>third time in a French history such a specialot is

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<v Speaker 8>actually implemented, so it's.

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<v Speaker 6>Quite a rare event.

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<v Speaker 8>What we understand for sure is that the government cannot

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<v Speaker 8>launch like new investments or for example, increase musy spending.

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<v Speaker 2>Yes, it's unusual, but then again it was used last

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<v Speaker 2>year because of the difficulties of getting a budget passed,

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<v Speaker 2>and so that remains the main question for the divided

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<v Speaker 2>government in France.

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<v Speaker 3>How are they going to do it?

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<v Speaker 8>Absolutely well, the Specialty series is another good illustration of

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<v Speaker 8>how fragmented is parliament in France and how little the

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<v Speaker 8>culture of compromise is in the countries in the country.

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<v Speaker 8>But in practice, if you look at the budget, we

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<v Speaker 8>understand that a compromise is within rich we are missing

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<v Speaker 8>some ten billion euros of spending cuts or tax heights

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<v Speaker 8>which are something feasible to get in the early weeks

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<v Speaker 8>of January. The objective remains to have a deficeit close

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<v Speaker 8>to five percent of the twenty twenty six GIDP, and

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<v Speaker 8>we would ark that that the king Maker Socialist Party

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<v Speaker 8>will be willing to find a compromise in order not

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<v Speaker 8>to run the risk of slap elections.

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<v Speaker 2>Yes, absolutely, which is the thing that has caused so

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<v Speaker 2>much difficulty for Manuel Marco, isn't it when he did

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<v Speaker 2>that in twenty four But look, France has still got

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<v Speaker 2>the eurzon it's highest budget deficit, and they've been trying

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<v Speaker 2>to fund that with using shorter maturities in terms of

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<v Speaker 2>the brow of borrowing. That in and of itself poses

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<v Speaker 2>some difficulties, doesn't it further down the line.

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<v Speaker 6>Yes absolutely.

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<v Speaker 8>I mean, if we take a step back the big

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<v Speaker 8>picture that France is indeed like lagging its supen piers

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<v Speaker 8>and substantial fiscal consolidation is required over four years to

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<v Speaker 8>just meet its commitments.

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<v Speaker 6>So in order to do.

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<v Speaker 8>That, France needs to increase taxes obviously, but also to

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<v Speaker 8>cut expenditures, and that will be through a pension reform

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<v Speaker 8>in the in the coming years, that's something that the

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<v Speaker 8>presidential election will will look at obviously in the future,

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<v Speaker 8>but it's also through some technical adjustment to the issuance policy,

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<v Speaker 8>you could shorten you can shorten the maturity at issuance

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<v Speaker 8>to decrease the interest payments over time.

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<v Speaker 6>But that's something which is risky as.

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<v Speaker 8>Well because you basically increase the worl over risk, and

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<v Speaker 8>so it's a basic trade off between lowering the cost

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<v Speaker 8>of funding but also increasing the refinancing risk over time.

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<v Speaker 2>When you think about the last year in France of

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<v Speaker 2>this kind of political uncertainty, the economic pressures, how would

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<v Speaker 2>you describe the year in economics and politics in France?

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<v Speaker 6>So that the.

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<v Speaker 8>Political situation has been obviously pretty messy, but the economy

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<v Speaker 8>has been pretty resilient, and quite surprisingly, the economy has

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<v Speaker 8>been growing pretty fast in the third quarter with open

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<v Speaker 8>five GP growth, which was ahead of most of its

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<v Speaker 8>European peers.

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<v Speaker 6>So residence of.

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<v Speaker 8>The economy political mess, and we would wait for twenty

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<v Speaker 8>six to get a sense of how consumers we'll respond

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<v Speaker 8>to that political mess at the end of the year,

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<v Speaker 8>and how films will keep on or not investing and benefit.

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<v Speaker 6>Or not from the lowering of the of.

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<v Speaker 8>The financing conditions thanks to the ECB easing policy over

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<v Speaker 8>the past quarters.

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<v Speaker 3>Okay, so that is interesting.

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<v Speaker 2>And there are also local elections due in March twenty

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<v Speaker 2>twenty six, so as well as the budget, there's also

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<v Speaker 2>that vote to consider too in the coming few months.

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<v Speaker 2>Jan thank you so much for your reflections on what's

0:13:33.440 --> 0:13:37.720
<v Speaker 2>happening in France, including that special law past just this week,

0:13:37.720 --> 0:13:41.840
<v Speaker 2>Bloomberg economist Jean Dalbar stay with us.

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<v Speaker 3>More from Bloomberg Daybakeube coming up after this.

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<v Speaker 2>Now for a word on the interest rate picture, then

0:13:49.800 --> 0:13:52.960
<v Speaker 2>for the year ahead, our m live currency rate stretches.

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<v Speaker 2>Ven Ram joins me this morning. Then, good to speak

0:13:56.400 --> 0:14:00.280
<v Speaker 2>to you. I think it's really important to understand the

0:14:00.320 --> 0:14:05.840
<v Speaker 2>shifting sands when it comes to interest rate policy. Reflect

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<v Speaker 2>on twenty twenty five first and how things have changed

0:14:08.720 --> 0:14:10.560
<v Speaker 2>this year morning, Caitlin.

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<v Speaker 9>So I think that you know, we have gone from

0:14:12.640 --> 0:14:16.559
<v Speaker 9>a position where major where the major global central banks

0:14:16.559 --> 0:14:18.679
<v Speaker 9>were saying, you know what, we need to cut through

0:14:18.720 --> 0:14:21.680
<v Speaker 9>interstates and then inflation is going to converge to two

0:14:21.680 --> 0:14:24.960
<v Speaker 9>percent this year. That of course hasn't happened with most

0:14:25.000 --> 0:14:28.080
<v Speaker 9>of the major central banks. We've got inflation that is

0:14:28.160 --> 0:14:32.040
<v Speaker 9>pretty sticky, holding either around two and a half or three,

0:14:32.600 --> 0:14:36.400
<v Speaker 9>and so you know, the suddenly the central banks are

0:14:36.400 --> 0:14:39.600
<v Speaker 9>having to turn around and ask themselves the question, a

0:14:39.760 --> 0:14:43.960
<v Speaker 9>hang on our our assumptions? Right, we don't see inflation

0:14:44.120 --> 0:14:48.000
<v Speaker 9>converging to two percent anytime soon, not definitely, not next

0:14:48.080 --> 0:14:50.160
<v Speaker 9>year according to even their own projections.

0:14:50.640 --> 0:14:52.720
<v Speaker 10>So there's been a bit of rethink.

0:14:52.760 --> 0:14:56.080
<v Speaker 9>And if you think back, you know the one currency episode,

0:14:56.120 --> 0:14:59.080
<v Speaker 9>in fact, interlinked to interestates of course, is the one

0:14:59.120 --> 0:15:02.520
<v Speaker 9>that sticks out to me most is the what happened

0:15:02.520 --> 0:15:02.840
<v Speaker 9>to the.

0:15:02.760 --> 0:15:04.560
<v Speaker 10>Euro at this point last year?

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<v Speaker 9>I remember calls were for the euro dollar to reach parity,

0:15:08.160 --> 0:15:10.440
<v Speaker 9>and look at where we are now going at one

0:15:10.560 --> 0:15:14.720
<v Speaker 9>eighteen against the dollars. So you know, if there's anything

0:15:14.800 --> 0:15:18.200
<v Speaker 9>that the markets have taught central banks and investors this year,

0:15:18.600 --> 0:15:19.720
<v Speaker 9>it's about humility.

0:15:19.840 --> 0:15:24.640
<v Speaker 2>I think, yeah, okay, a huge change. Briefly, then, what

0:15:24.680 --> 0:15:26.640
<v Speaker 2>do you think is the most important thing to watch

0:15:26.680 --> 0:15:28.160
<v Speaker 2>out for for twenty twenty six?

0:15:29.640 --> 0:15:33.560
<v Speaker 9>Well, I think that you know, one factor that I'll

0:15:33.600 --> 0:15:37.400
<v Speaker 9>be watching deffinitely is for our fast central banks are

0:15:37.440 --> 0:15:40.960
<v Speaker 9>going to turn around and raise rates if needed, for instance,

0:15:41.040 --> 0:15:43.920
<v Speaker 9>but the Bank of Japan or they already, of course

0:15:43.960 --> 0:15:47.480
<v Speaker 9>in a rate hiking cycle. But you know, the tailor

0:15:47.560 --> 0:15:50.200
<v Speaker 9>rule rate shows that they need to be at one

0:15:50.200 --> 0:15:55.840
<v Speaker 9>point five given their own inflation projections and growth projections.

0:15:56.200 --> 0:15:58.920
<v Speaker 9>But you know, the Bank of Japan is kind of

0:15:59.280 --> 0:16:01.840
<v Speaker 9>going at a gay She'll bease thirty five basis.

0:16:01.440 --> 0:16:03.680
<v Speaker 10>Points a year. I don't think that's going to cut it.

0:16:05.840 --> 0:16:08.600
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