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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg Daba,

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Speaker 1: a QT podcast available every morning on Apple, Spotify or

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Speaker 1: wherever you listen. It's Friday, the seventh of June in London.

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Speaker 1: I'm Caroline Hepke and.

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Speaker 2: I'm Stephen carollin Brussels, where far right parties are in

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Speaker 2: focus in the European elections. As voters across the twenty

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Speaker 2: seven member nations have their.

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Speaker 1: Say, markets struggle to decipher when the next ECB rate

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Speaker 1: cut may come after a landmark reduction from the Central Bank.

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Speaker 2: And we have a special report on Russia's wartime central banker,

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Speaker 2: who's increasingly telling Putin he thinks he doesn't want to hear.

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Speaker 1: Let's start with a roundup of our top stories.

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Speaker 2: Voters are going to the polls in the European Union

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Speaker 2: in an election that will shape the policy direction of

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Speaker 2: the block for the next five years. The EU is

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Speaker 2: facing key challenges on defense, competing economically with the US,

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Speaker 2: China and other emerging markets, and advancing on its climate goals.

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Speaker 2: Polls taken before voting started suggest par parties may boost

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Speaker 2: their numbers in the European Parliament. Head of Political Risk

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Speaker 2: of consultants JS held. Livia Pagi says the results could

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Speaker 2: also impact the EU's policy on Ukraine.

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Speaker 3: There's a number of tradeoffs.

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Speaker 4: There's a lot of parties that do not want to

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Speaker 4: make the political trade offs in supporting Ukraine, and this

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Speaker 4: is going to have a key impact on the trajectory

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Speaker 4: of this conflict.

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Speaker 2: As Lyvia Pagi hinted out, there that's been calls to

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Speaker 2: ramp up spending on Europe's military infrastructure and response to

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Speaker 2: Russia's war in Ukraine. Much of that funding would have

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Speaker 2: to be approved by the European Parliament. Voting continues until Sunday,

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Speaker 2: with the first projections of the chambers makeup expected on

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Speaker 2: Sunday evening.

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Speaker 1: Now, the European Central Bank delivered on its promise to

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Speaker 1: cut interest rates yesterday, the ECB delivered a quarter point

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Speaker 1: reduction in the deposit rate from its nine month peak

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Speaker 1: of four percent. However, investors were left querying where policy

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Speaker 1: is headed next after the Central Bank resident Christine Lagarde

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Speaker 1: refused to be drawn on timing.

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Speaker 5: Are we today moving into a dialing back phase? I

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Speaker 5: wouldn't volunteer that because, as I said, we are making

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Speaker 5: a decision on the basis of the confidence that we

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Speaker 5: have that we are on a.

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Speaker 1: Path, Christine Laguard speaking there. While investors are still betting

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Speaker 1: that the ECB will lower interest rates again this year,

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Speaker 1: the timing of that reduction is once again being questioned.

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Speaker 1: Trade has went from betting on two additional moves this

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Speaker 1: year to favoring just one.

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Speaker 2: UK tech mogul Mike Lynch has been acquitted of fraud

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Speaker 2: by a court in San Francisco and a significant loss

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Speaker 2: for US prosecutors. Lynch was accused of duping here At

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Speaker 2: Packard into buying his software start up, Autonomy for eleven

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Speaker 2: billion dollars in twenty eleven Stephen Chamberlain, Autonomy's former vice

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Speaker 2: president for finance, who was also on trial and was

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Speaker 2: acquitted by the jury. Lynch was extradited from the UK

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Speaker 2: last year to face the US after he last a

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Speaker 2: civil trial in London two years ago over allegations that

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Speaker 2: he had inflated his company's value ahead of the sale.

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Speaker 1: UK local authorities are warning of a significant funding gap

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Speaker 1: ahead of the general election. According to representatives, budgets are

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Speaker 1: reaching their limits after years of government underfunding. Bloomberg's Tima

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Speaker 1: Adebayo has more.

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Speaker 4: While the Labor and Conservative Party's battle for victory on

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Speaker 4: July fourth, a council spending crisis could be brewing in

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Speaker 4: the background. The Local Government Association is warning of a

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Speaker 4: six point two billion pound hole in regional budget plans

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Speaker 4: after years of growing demand and government neglect. Costs have

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Speaker 4: stored by fifteen billion pounds since the last fiscal year

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Speaker 4: thanks to double digit inflation, say the group. These latest

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Speaker 4: administrative woes add to the public service dilemma facing the

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Speaker 4: country's next leader. Think tank the Institute for Government claim

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Speaker 4: some offerings like adult social care are on the brink

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Speaker 4: of collapse. In London, Tima at a buyer Bloomberg Radio.

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Speaker 2: Labor will unveil a scheme to penalize foreign property buyers

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Speaker 2: and the UK is part of its new housing policy.

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Speaker 2: The party plans to raise stamp duty on selling homes

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Speaker 2: to international buyers and force new developments to put domestic

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Speaker 2: offers first. Its policies are being closely watched given its

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Speaker 2: massive lead in the polls. Nationwide data shows a typical

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Speaker 2: UK house now costs five point two times average gross annual.

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Speaker 3: Earnings, up from four point four percent.

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Speaker 2: Because we're from four point four times when the Conservatives

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Speaker 2: took power in twenty ten.

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Speaker 1: Keith Gill, who's Roaring Kitty online Monica has sent game

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Speaker 1: Stop soaring, says that he'll be back on YouTube today

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Speaker 1: for the first time in three years.

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Speaker 6: His expected return is sparking further speculation that Gil is

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Speaker 6: bullish on game Stop. Earlier this week, Gil, who became

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Speaker 6: icon for cooped up retail traders at the height of

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Speaker 6: a pandemic, shared a screenshop that appeared to show his

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Speaker 6: owning a one hundred and sixteen million dollar position in

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Speaker 6: game Stop, a position that large would make Gil one

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Speaker 6: of the company's five biggest investors in New York. Charlie

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Speaker 6: pet Bloomberg Radio.

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Speaker 1: Now, in a moment, we're going to bring you a

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Speaker 1: story about Russia. By the relationship between Elvira and Nebulina

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Speaker 1: and Vladimir Putin central Bank governor and president is so

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Speaker 1: crucial to Russia's war economy. But before we get to that, Stephen,

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Speaker 1: you're in Brussels this morning had a hugely important moment

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Speaker 1: for the European Union. Of course, it's the EU elections.

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Speaker 1: They take a number of days. But what's at stake.

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Speaker 3: Yeah, I mean we're in the midst of voting.

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Speaker 2: So the Netherlands voted yesterday, we have Ireland and the

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Speaker 2: Czech Republic voting today, and the other EU member states

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Speaker 2: will vote over the weekend.

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Speaker 3: This is an election.

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Speaker 2: If you think back, Caroline to five years ago, it

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Speaker 2: was climate issues dominated the run up to this europe

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Speaker 2: wide ballot. We were in the midst of the climate

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Speaker 2: strikes led by Greta Tunberg. It was an issue that

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Speaker 2: was really central to how voters were thinking about. What

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Speaker 2: is an international issue at an international election. This time around,

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Speaker 2: it's the war in Ukraine. It's the defense challenges facing

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Speaker 2: the European Union, its ambitions to try and ramp up

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Speaker 2: its military infrastructure, ramp up joint ramp up investment in

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Speaker 2: this key and important sector. It is the Green Deal,

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Speaker 2: the ambitious climate deal that was passed during the last parliament.

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Speaker 3: It is the question of the future of that. How

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Speaker 3: many of.

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Speaker 2: Those ambitious climate policies can be maintained now will will

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Speaker 2: a change and makeup of the European Parliament mean some

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Speaker 2: pulling back on some of those goals that aim to

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Speaker 2: make the EU carbon neutral by twenty to fifty. Then

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Speaker 2: there's the question two of competitiveness. It's a long running

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Speaker 2: question when it comes to the European Union, but has

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Speaker 2: come more acutely into focus as we've seen the United

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Speaker 2: States ramping up its ending on the Inflation Reduction Act.

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Speaker 2: Of course, China also supporting its economy there as well.

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Speaker 2: These are big challenges and big issues that need to

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Speaker 2: be tackled by coordination across the twenty seven member states,

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Speaker 2: and the European Parliament is central to that.

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Speaker 1: Yeah, absolutely, sort of having to hold its own between

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Speaker 1: the US, China and others. Just talk us through though,

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Speaker 1: how it plays out. I've mentioned that it's four days,

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Speaker 1: it's twenty seven countries. It is a huge mammoth undertaking.

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Speaker 2: Yeah, I mean three hundred and seventy million eligible voters

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Speaker 2: across the European Union. It's the second biggest election in

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Speaker 2: this big year of elections, after the Indian election we

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Speaker 2: talked about last week as well. This is a question

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Speaker 2: where you'll have the country's voting until Sunday evening. On

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Speaker 2: Sunday evening, we will get the first projections for what

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Speaker 2: the new parliament will look like, how the makeup of

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Speaker 2: those groups will be. Then what happens is you'll actually

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Speaker 2: have some parties at a national level deciding to change

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Speaker 2: allegiance within the European Parliament. So there's a couple of

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Speaker 2: big ones we'll be watching, and notably in Germany, the

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Speaker 2: AfD were expelled from the Identity Group that they're part of.

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Speaker 2: Currently is to be a question of where they go

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Speaker 2: after this election, and other parties are continuing moves as well.

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Speaker 3: So that's going to be the next step, and then

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Speaker 3: we get.

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Speaker 2: Towards the subsequent parts to that, which is how you

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Speaker 2: try and build a majority to vote a new president

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Speaker 2: of the European Commission. The national leaders have to decide

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Speaker 2: who they want to put forward as President of the

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Speaker 2: European Commission. We know what Levangeleon wants a second term.

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Speaker 2: If they then decide on a candidate that goes to

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Speaker 2: the European Parliament, they have to win. That candidate has

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Speaker 2: to win a majority of votes three hundred and sixty

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Speaker 2: one MEPs there.

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Speaker 1: Okay, so let's see whether whether that happens or not.

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Speaker 1: In terms of the challenges though that you've laid out

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Speaker 1: quite neatly about Europe, is that really what sort of

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Speaker 1: voters care about? Because I suppose you're talking quite top

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Speaker 1: level about, you know, issues around trade and competitiveness, but

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Speaker 1: I suppose ordinary voters might have other issues as well

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Speaker 1: that they're worried about.

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Speaker 2: Well, exactly, there are two ways you have to think

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Speaker 2: about these elections. One, there are some people that of

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Speaker 2: course will go to the polls with big European issues

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Speaker 2: in mind. But it's also an election being held in

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Speaker 2: twenty seven different countries, so there are national issues that

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Speaker 2: play into these votes as well. In France, for example,

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Speaker 2: the campaign has been framed as a referendum on Emmanuel

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Speaker 2: Macron's performance as president, and that's going to be seen

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Speaker 2: as a key test of how he's faring at.

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Speaker 3: A national level.

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Speaker 2: This is something that we're seeing in other countries as well,

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Speaker 2: where it's sort of serving as a mid term referendum

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Speaker 2: on governments there. When you look at the polling around this,

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Speaker 2: the top issue for voters poverty and social exclusion, public health,

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Speaker 2: not areas that necessarily you'll directly see. Some of the

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Speaker 2: big talk about these policies around economy in the jobs

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Speaker 2: and defense and security do come up there as well,

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Speaker 2: but voters are mostly going to be concerned with things

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Speaker 2: that affect them directly. It's why we talk about them

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Speaker 2: as being second order elections. And why, in fact, the

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Speaker 2: results sometimes do involve some people registering a protest vote,

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Speaker 2: which is why we see bigger representations of the fire

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Speaker 2: right groups, for example, in the European Parliament than in

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Speaker 2: national parliaments.

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Speaker 1: Okay, Steven, good stuff, but that is throughout the morning.

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Speaker 1: Let's turn our attention though, also of course, to something

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Speaker 1: that does deeply affect and concern Europe. This, of course

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Speaker 1: is Russia. Elvira Nebulina has been Vladimir Putin's Central Bank

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Speaker 1: governor since he made his first move against Ukraine in

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Speaker 1: twenty fourteen by annexing Crimea. She's done as much as

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Speaker 1: anyone to sanction proof Russia, but the fallout of Putin's

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Speaker 1: full scale invasion of twenty twenty two has tested her

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Speaker 1: toolkit to the limit. She's face criticism at home, but

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Speaker 1: Putin still values her, and it's this relationship that may

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Speaker 1: come to define the economy that emerges from war. Joining

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Speaker 1: us now to discuss his Bloomberg editor Paul Abelski in

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Speaker 1: terms of how Elvira Nebulina came to place a critical

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Speaker 1: role on Vladimir Putin's economic team. Just take us through

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Speaker 1: how that happened.

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Speaker 7: I think she's proven to be a very savvy crisis

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Speaker 7: manager and putting at the end of the day, values results.

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Speaker 7: We've some of the people have spoken with told us

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Speaker 7: that after the invasion of Ukraine, there was a joke

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Speaker 7: going around AMOUNT officials which said which went along the

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Speaker 7: lines of, you know, two surprises awaited. Put in one

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Speaker 7: was just how incompetent his army was despite knowing in

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Speaker 7: advance what was about to happen, and just how skilled

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Speaker 7: his economists proved to be despite being the last to

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Speaker 7: know about the invasion. So this kind of you know,

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Speaker 7: summarizes basically what the technocrats have been able to accomplish.

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Speaker 7: Since she is very much part of that group.

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Speaker 2: Well, what's been her policy response to the economic and

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Speaker 2: financial fallout from the invasion of Ukraine.

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Speaker 7: I think we can group, but in UH we can

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Speaker 7: separate it into groups. Initially, the challenge was just to

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Speaker 7: avoid UH financial meltdown and panic, and you know, she

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Speaker 7: did that in a fairly orthodox way. Interest rates were

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Speaker 7: raised sharply, capital controls were imposed. But you know, as

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Speaker 7: the war, as the war, economy UH got got got going,

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Speaker 7: new challenge, new challenges have emerged. So now we're talking

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Speaker 7: about record labor shortages.

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Speaker 6: Uh.

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Speaker 7: Inflation, Uh that's been above target and is unlikely to

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Speaker 7: end this year uh at the central banks target level.

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Speaker 7: So uh, she is kind of after the initial emergency response. Uh,

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Speaker 7: it's been business has been back to business as usual

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Speaker 7: for the Central Bank. However, uh it it increasingly seems

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Speaker 7: to be an ill fit for an economy that you

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Speaker 7: know has other priorities and inflation and so you know,

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Speaker 7: we're going to be seeing that tension play out increasingly

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Speaker 7: as as you know, especially if the war drags on.

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Speaker 7: We're now into the third year, so a lot will

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Speaker 7: depend on just the duration of the conflict.

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Speaker 1: Yeah, and on that. What is the state of Russia's

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Speaker 1: war economy? Then if you say that things are going

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Speaker 1: to become more difficult, how much is the war affecting

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Speaker 1: Russia's economy.

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Speaker 7: It's it's warped the economy to an extent that was

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Speaker 7: really hard to foresee. Obviously, the sanctions have disrupted trade,

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Speaker 7: and Russia has been finding workarounds that uh, you know,

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Speaker 7: have largely enabled it to keep energy exports going and

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Speaker 7: so on. However, we're looking at defense spending that is

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Speaker 7: only been uh the colmomy compared to what the Soviet

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Speaker 7: union was was was implement thing and you know, investing

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Speaker 7: capital in in in tanks and and and missiles is

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Speaker 7: not the best way to put your money to work.

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Speaker 7: So over time, I think we will we will see Russia,

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Speaker 7: you know, increasingly lagged behind, grow more dependent on China

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Speaker 7: and some of its other you know, increasingly more important

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Speaker 7: UH trade partners. And in the short term labor shortages

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Speaker 7: have become extreme. Unemployment is basically is at a record

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Speaker 7: low level. It's in the economy is at full employment.

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Speaker 7: So we're we're you know, we're we're in a situation

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Speaker 7: where it's bumping. It's it's it's bumping against sort of

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Speaker 7: some natural limits of what of what kind of growth

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Speaker 7: and what kind of production can generate. It's not clear

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Speaker 7: where where will find additional sources of growth and labor.

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