WEBVTT - Daybreak Weekend: US CPI, ECB Meeting, RBA Decision 0:00:00.080 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:09.360 --> 0:00:12.160 This is Bloomberg day Break Weekend, our global look ahead 0:00:12.160 --> 0:00:14.120 at the top stories in the coming week from our 0:00:14.200 --> 0:00:17.400 Daybreak anchors all around the world. Straight ahead on the program, 0:00:17.400 --> 0:00:20.240 and look at some key inflation data in the US 0:00:20.280 --> 0:00:23.640 what it could mean for FED policy moving forward, Plus 0:00:23.640 --> 0:00:26.520 a look at earnings from the computer software Giant Oracle. 0:00:26.800 --> 0:00:28.440 I'm Tom Busby in New York. 0:00:28.600 --> 0:00:31.480 I'm Caroline Hebcker in London, where we're following europe Central 0:00:31.480 --> 0:00:35.000 Bank as it navigates an unprecedented time in the region. 0:00:35.440 --> 0:00:38.400 I'm Paul Allen in Sydney, looking at next week's IBA 0:00:38.560 --> 0:00:41.839 decision and Australia's social media band for teams. 0:00:43.159 --> 0:00:47.360 That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 0:00:47.400 --> 0:00:51.280 eleven three on New York, Bloomberg ninety nine to one, Washington, DC, 0:00:51.720 --> 0:00:56.600 Bloomberg ninety two nine, Boston, DAB Digital Radio, London, Sirius 0:00:56.760 --> 0:00:59.720 XM one twenty one, and around the world on Bloomberg 0:00:59.760 --> 0:01:02.360 Radio and the Bloomberg Business. 0:01:02.120 --> 0:01:08.360 At Good day to you. I'm Tom Busby, and we 0:01:08.400 --> 0:01:10.720 begin today's program with a look at some key inflation 0:01:10.880 --> 0:01:13.640 data on the heels of a big bounce back in 0:01:13.760 --> 0:01:18.000 US job creation last month. November's Consumer Price Index out 0:01:18.040 --> 0:01:20.840 on Wednesday eight thirty am Wall Street Time. The Producer 0:01:20.880 --> 0:01:23.840 Price Index for last month comes one day later. For 0:01:23.959 --> 0:01:26.880 more on what to expect, we're joined by Edward Harrison, 0:01:26.959 --> 0:01:30.680 author of Bloomberg's Everything Risk newsletter. Edward, thank you so 0:01:30.760 --> 0:01:31.600 much for being here. 0:01:31.959 --> 0:01:32.640 Good to talk to you. 0:01:32.720 --> 0:01:33.479 Tom Well. 0:01:33.480 --> 0:01:36.360 Now, inflation has come a long way down over the 0:01:36.360 --> 0:01:39.000 past two years, still has a long way to go 0:01:39.080 --> 0:01:41.800 before hitting the Fed's long established target of two percent. 0:01:41.920 --> 0:01:46.120 So what are you expecting to see in October's CPI 0:01:46.280 --> 0:01:47.560 number this week? 0:01:47.600 --> 0:01:51.000 We're expecting to see the year over year number for 0:01:51.120 --> 0:01:54.680 CPI tick up ever so slightly to two point seven 0:01:54.680 --> 0:01:57.800 percent from two point six percent. And when you look 0:01:57.800 --> 0:02:00.520 at the core number, taking out food and energy, the 0:02:00.960 --> 0:02:03.760 expectation is it's going to be roughly the same as 0:02:03.800 --> 0:02:06.560 it was last month, which is three point three percent. 0:02:07.040 --> 0:02:11.240 Both of those are based on zero point three percent 0:02:11.480 --> 0:02:16.200 rises on a monthly basis. Now, obviously two point six 0:02:16.280 --> 0:02:19.600 percent going up to two seven and three three are 0:02:19.760 --> 0:02:25.480 not that great numbers, but it's still coming down enough 0:02:26.280 --> 0:02:30.800 that I expect that the FED will still cut interest 0:02:30.880 --> 0:02:36.160 rates in December if the data come out as expected. 0:02:36.040 --> 0:02:38.600 Wow, only about half a Wall Street thinks is with 0:02:38.680 --> 0:02:41.200 you on that one, But there is a lot of hope. Well, 0:02:41.280 --> 0:02:44.200 let's talk more about those numbers and what's behind this 0:02:44.240 --> 0:02:47.240 stubbornly high inflation, because, as you said, two point seven 0:02:47.400 --> 0:02:51.079 percent year over year overall, it's good, it's not great. 0:02:51.160 --> 0:02:53.640 So what are the big factors that are keeping inflation 0:02:53.760 --> 0:02:54.520 so high? 0:02:54.639 --> 0:02:57.799 Well, it's definitely not food and energy, right, because if 0:02:57.800 --> 0:03:00.799 you you know, without food and energy, three point three 0:03:00.840 --> 0:03:04.639 percent versus two point seven percent a year on year 0:03:05.440 --> 0:03:08.760 with food and energy, Really it's about you know, core 0:03:08.919 --> 0:03:12.960 services and housing in particular. Those are the things that 0:03:13.120 --> 0:03:16.960 are still you know sticky, and you know sticky at 0:03:17.000 --> 0:03:20.320 a level of over three percent. And so what that 0:03:20.400 --> 0:03:24.240 means is is that as twenty twenty five develops, you know, 0:03:24.320 --> 0:03:27.040 the cuts that we've been seeing at every single meeting 0:03:27.080 --> 0:03:29.000 by the FED are going to come to an end 0:03:29.520 --> 0:03:32.440 in about a week's time. You know, the week after this, 0:03:32.880 --> 0:03:35.880 we're gonna see the FEDS dot plot and they're in 0:03:35.920 --> 0:03:38.440 that it's going to tell us what they expect, how 0:03:38.440 --> 0:03:41.920 many rate cuts that they expect. The market is now 0:03:41.960 --> 0:03:46.880 pricing in actually about three rate cuts for twenty twenty five. 0:03:47.200 --> 0:03:49.840 So let's just see what the what the Fed says 0:03:49.880 --> 0:03:52.640 when they come out with their data a week from now. 0:03:52.840 --> 0:03:56.240 Yeah, that's a biggie. This is a meeting December seventeenth, eighteenth, 0:03:56.880 --> 0:03:59.640 the big decision, you know, to either hold steady or 0:03:59.720 --> 0:04:03.200 as you expect another quarter percent, you know, twenty five 0:04:03.240 --> 0:04:04.080 basis point cut. 0:04:04.120 --> 0:04:06.320 Is that what you're thinking, Yeah, you know, and that's 0:04:06.400 --> 0:04:09.040 that's pretty much in line with the market. We can 0:04:09.040 --> 0:04:11.800 talk a little bit about the jobs numbers that we 0:04:11.840 --> 0:04:14.760 saw last week, but on the basis of the jobs numbers, 0:04:14.800 --> 0:04:19.200 immediately after the jobs numbers came out, the swaps market, 0:04:19.279 --> 0:04:22.880 which shows what the market is expecting the Fed to do, 0:04:23.440 --> 0:04:26.560 went from like, you know, sixty percent odds of a 0:04:26.640 --> 0:04:30.320 cut to over eighty percent odds of a cut. So 0:04:30.600 --> 0:04:32.960 this number, the CPI number, this is going to be 0:04:33.000 --> 0:04:35.120 the one that either solidifies it or makes it a 0:04:35.160 --> 0:04:39.320 little bit murky. But word eighty percent, So that says 0:04:39.400 --> 0:04:43.320 that likely we're going to move towards eighty five ninety 0:04:43.320 --> 0:04:46.119 percent if the number is in line with expectations. 0:04:46.279 --> 0:04:49.159 Wow, so that jobs report really did a number you 0:04:49.200 --> 0:04:51.280 think for the FED, Well, let's talk about it. Two 0:04:51.360 --> 0:04:54.120 hundred and twenty seven thousand jobs added. It looks like 0:04:54.400 --> 0:04:58.039 maybe we've exercised the ghost of those devastating strikes, a 0:04:58.080 --> 0:05:02.360 couple of really bad hurricanes. I mean, is this, Hey, 0:05:02.360 --> 0:05:05.400 we're back in business now after that dismal October number. 0:05:05.640 --> 0:05:08.120 Well, you know, it does seem that way to me. 0:05:08.520 --> 0:05:11.720 The number, the two twenty seven number comes with fifty 0:05:11.760 --> 0:05:15.280 six thousand of net revision upward from the last two 0:05:15.320 --> 0:05:18.440 months before that, and now we're at about one hundred 0:05:18.480 --> 0:05:22.839 and seventy some thousand a month over the last three months. 0:05:22.839 --> 0:05:26.920 That's up by fifty thousand. So you might think that 0:05:27.000 --> 0:05:30.120 those numbers would make the market spooked, but actually it 0:05:30.279 --> 0:05:32.960 wasn't because if you look at the household survey, the 0:05:33.040 --> 0:05:36.920 unemployment rate went up, So the unemployment rate went up 0:05:36.920 --> 0:05:39.400 from four point one to four point two percent. And 0:05:39.440 --> 0:05:42.640 if you've listened to what these FED speakers are saying, 0:05:42.720 --> 0:05:45.560 Chris Waller is one that I was thinking about. Another 0:05:45.600 --> 0:05:50.040 one is the Atlanta Fed Raphael Bostic. They're basically saying, 0:05:50.320 --> 0:05:54.159 you know, unless the data are really terrible, we want 0:05:54.200 --> 0:05:57.600 to have a preventive cut going forward. Same thing from 0:05:57.640 --> 0:06:01.280 Austin Gouldsby of the Chicago Fed, they're all saying that, 0:06:01.360 --> 0:06:03.880 you know, this meeting, yes we're going to give the cut, 0:06:03.960 --> 0:06:08.000 the market's priced it in, but then going forward we're 0:06:08.040 --> 0:06:09.840 going to be a little more circumspect. 0:06:10.000 --> 0:06:13.159 So three rate cuts in a row to end twenty 0:06:13.200 --> 0:06:17.080 twenty four year thinking, but twenty twenty five definitely dialing 0:06:17.200 --> 0:06:21.320 back on that more aggressive rate cut strategy exactly. 0:06:21.360 --> 0:06:24.200 And you know, a lot of this, remember, is about 0:06:24.600 --> 0:06:27.800 the real interest rate. That is is that as inflation 0:06:27.920 --> 0:06:32.040 comes down, the FED is saying, unless we bring rates down, 0:06:32.520 --> 0:06:35.719 then it's going to be restrictive, not necessarily for those 0:06:36.040 --> 0:06:40.040 companies that can go out and borrow money in the 0:06:40.080 --> 0:06:43.400 capital markets, but for small businesses that are getting their 0:06:43.520 --> 0:06:46.680 loans based upon these rates. We really need to bring 0:06:46.720 --> 0:06:50.040 them down in order to be less restrictive for those companies. 0:06:50.440 --> 0:06:54.320 Well in November, CPI data out there coming Wednesday, PPI 0:06:54.440 --> 0:06:57.960 on Thursday, and our thanks to Edward Harrison, he's the 0:06:58.000 --> 0:07:01.560 author of Bloomberg's Everything Risk newsletter. We turned out to 0:07:01.680 --> 0:07:04.960 earnings from one of the biggest names in technology, software 0:07:05.000 --> 0:07:08.359 giant Oracle putting out its Q two results on Monday. 0:07:08.760 --> 0:07:12.960 Will the artificial intelligence boom continue to fuel oracles year 0:07:13.080 --> 0:07:15.440 long rally and for more we're joined by Ana rog 0:07:15.480 --> 0:07:19.840 Rana Bloomberg Intelligence Technology Analysts. Ana Rok, thank you so 0:07:19.920 --> 0:07:24.240 much for joining us. Shares of Oracle have skyrocketed this year, 0:07:24.320 --> 0:07:27.760 mostly on a cloud infrastructure services. So what do you 0:07:27.840 --> 0:07:30.440 expect to see in this earnings report on Monday. 0:07:30.760 --> 0:07:33.239 Yeah, I think we'll listen to more of the same 0:07:33.360 --> 0:07:37.240 in a sense that cloud infrastructure revenue should continue to 0:07:37.280 --> 0:07:39.720 go up. The question is going to be by how 0:07:39.840 --> 0:07:43.480 much and whether the revenue recognition is being held. 0:07:43.280 --> 0:07:47.520 Back by the shortage of supply, which is, you know, 0:07:47.560 --> 0:07:50.840 the GPUs that are sold by Nvidia, whether they're able 0:07:50.840 --> 0:07:53.560 to get their hands and do enough of them. 0:07:53.720 --> 0:07:55.760 So when you look at somebody like an Oracle, it 0:07:55.800 --> 0:07:58.400 has a massive backlog right now, and we'll get to 0:07:58.440 --> 0:08:01.280 that in a second how it has them backlog. But 0:08:01.360 --> 0:08:04.000 the problem a lot of these cloud infrastructure providers are 0:08:04.040 --> 0:08:07.720 facing is their data center capacity as well as their 0:08:07.760 --> 0:08:11.920 hardware capacity is still a bottleneck, which is people are 0:08:11.920 --> 0:08:14.280 sending work for them, but they're not able to fulfill 0:08:14.280 --> 0:08:17.920 that demand. And that's where Oracle also is at this point. 0:08:18.120 --> 0:08:23.200 So a shortage of GPUs stressed data centers. But now 0:08:23.280 --> 0:08:27.160 Oracle has built more data centers, hasn't it, including plans 0:08:27.280 --> 0:08:29.760 for a nuclear powered one. It is just go go 0:08:29.760 --> 0:08:32.160 go for them. Are they keeping up? Are they going 0:08:32.200 --> 0:08:33.040 to meet demands? 0:08:33.520 --> 0:08:37.439 See? The thing is, it's unlike just you know, buying GPUs, 0:08:37.520 --> 0:08:41.079 which is also in a shortage. Data centers take time. 0:08:41.240 --> 0:08:44.000 You just can't spin up a data center overnight. It 0:08:44.080 --> 0:08:47.079 takes a few years to build one. What companies are 0:08:47.080 --> 0:08:49.880 doing right now is taking their role data centers and 0:08:50.600 --> 0:08:55.680 retrofitting them with new equipment, new cooling technology, new GPUs, 0:08:55.840 --> 0:08:58.680 new hardware in order to run some of these workloads, 0:08:59.000 --> 0:09:01.400 but in order to create the new one, that takes time. 0:09:01.720 --> 0:09:04.760 And actually that's what's benefiting Oracle in one way because 0:09:05.559 --> 0:09:08.880 Microsoft has this relationship with open Ai, and open Ai 0:09:09.080 --> 0:09:13.760 is sending more and more workloads to Microsoft's cloud product, 0:09:13.800 --> 0:09:17.720 which is called Asher, and Microsoft is seeing that shortage. 0:09:17.800 --> 0:09:21.040 So guess what it's doing. It's tapping into Oracle and saying, hey, 0:09:21.080 --> 0:09:24.160 can you be my subcontractor and I can lease into 0:09:24.240 --> 0:09:27.360 your data center and run some of the workloads over there. 0:09:27.800 --> 0:09:30.400 And that's really how you know the Oracles laughing about 0:09:30.400 --> 0:09:34.160 it because it's having to service it's one of its 0:09:34.160 --> 0:09:37.480 bigger competitors and partners, so it's getting a lot of 0:09:37.480 --> 0:09:40.800 work from Microsoft also at this point. So that is 0:09:41.240 --> 0:09:43.280 that is the big story for Oracle, then we think 0:09:43.320 --> 0:09:45.680 it is going to be the big thing for at 0:09:45.800 --> 0:09:47.200 least the next couple of years. 0:09:47.480 --> 0:09:50.640 Well, Oracle not only Microsoft, It also had deals with Google, 0:09:50.800 --> 0:09:53.000 and just a few months ago a big deal with 0:09:53.080 --> 0:09:57.280 Amazon Web Services was exactly correct, Yeah, exactly, yeah, tell 0:09:57.320 --> 0:09:58.480 me about all those deals. 0:09:58.760 --> 0:10:01.080 It is the same deal. Basically. What it is saying 0:10:01.200 --> 0:10:04.600 is if you get a command or a workload and 0:10:04.800 --> 0:10:07.640 you don't have capacity to do it, send it my way. 0:10:07.760 --> 0:10:10.560 I will be your subcontractor and you can run it 0:10:10.600 --> 0:10:12.839 in my data center and you will pay me for it. 0:10:13.040 --> 0:10:16.240 So it's a good thing for Oracle that it has 0:10:16.320 --> 0:10:19.320 this capacity, it has this data center. And as I 0:10:19.360 --> 0:10:22.880 said in principle, the only thing that's holding back all 0:10:22.920 --> 0:10:25.760 of them is that there's a shortage of GPUs and 0:10:25.800 --> 0:10:29.440 the processing capacity. There is another thing that's helping Oracle. Frankly, 0:10:29.640 --> 0:10:32.439 I talked about one thing as an outsourced for the 0:10:32.800 --> 0:10:35.800 three companies that we mentioned, but there is another element 0:10:35.920 --> 0:10:38.240 that a lot of startups are also going to Oracle 0:10:38.280 --> 0:10:40.200 and saying, you know what, I just want to go 0:10:40.280 --> 0:10:43.920 out and experiment on this cloud infrastructure, and Oracle is 0:10:43.960 --> 0:10:46.559 giving them a good deal giving them, you know, because 0:10:46.600 --> 0:10:49.800 remember from a market size point of view, Oracle's cloud 0:10:49.880 --> 0:10:53.000 infrastructure is fourth in size. The biggest one is Amazon, 0:10:53.240 --> 0:10:58.360 then Microsoft, then Google, and Oracle, given its large wallet, 0:10:58.880 --> 0:11:01.920 if we can fund set billion dollars of capital expenditures, 0:11:02.440 --> 0:11:04.760 is now, you know, in our view, the fourth biggest 0:11:05.040 --> 0:11:06.319 cloud data center company. 0:11:06.520 --> 0:11:10.160 But is the cloud data center becoming more not just 0:11:10.200 --> 0:11:13.120 the management what it used to be, becoming more of 0:11:13.160 --> 0:11:14.439 the cash cow for Oracle? 0:11:14.760 --> 0:11:16.400 Yeah, it is. Oh no, no, it's growing very well. 0:11:16.480 --> 0:11:19.679 It's growing somewhere north of forty percent. I think Consensus 0:11:19.679 --> 0:11:23.359 has that product to grow by fifty percent this particular 0:11:24.040 --> 0:11:26.720 quarter that's going to be on Monday. So from a 0:11:26.840 --> 0:11:28.800 revenue point of view, they are gaining. 0:11:28.520 --> 0:11:30.080 As much market share as possible. 0:11:30.440 --> 0:11:33.800 Whether they are making enough money, that's okay for them, 0:11:33.920 --> 0:11:36.960 because it's okay to take to buy it at a 0:11:37.320 --> 0:11:41.080 cheaper price or taking even of a big loss on 0:11:41.160 --> 0:11:43.600 that end, only because they have some other products that 0:11:43.600 --> 0:11:47.360 are highly profitable. Their old business of core database is 0:11:47.600 --> 0:11:52.679 very profitable. They have other applications, cloud applications, on HR 0:11:52.960 --> 0:11:56.160 customer service management. They are very profitable. So it has 0:11:56.559 --> 0:11:58.720 is it is really one of the most profitable software 0:11:58.720 --> 0:12:01.120 companies out there. It's okay for them to lose a 0:12:01.120 --> 0:12:03.640 little bit money on the infrastructure and service. I don't 0:12:03.640 --> 0:12:07.640 think they lose money there because since those financials are 0:12:07.640 --> 0:12:10.440 not publicly available, even if they make less money on 0:12:10.480 --> 0:12:13.720 that compared to the database, that doesn't matter because in 0:12:13.760 --> 0:12:17.480 totality it's adding to the overall revenue base of the company. 0:12:17.679 --> 0:12:19.959 Well, a lot to watch for Q two results from 0:12:20.000 --> 0:12:23.280 Oracle out on Monday. Our thanks to Anna rod Rana 0:12:23.400 --> 0:12:27.079 Bloomberg Intelligence and Technology Analysts, and coming up on Bloomberg 0:12:27.160 --> 0:12:29.720 day Break weekend, we'll look ahead to Europe's Central Bank 0:12:29.760 --> 0:12:33.440 decision as it navigates an unprecedented time in the region. 0:12:33.880 --> 0:12:47.560 I'm Tom Busby, and this is Bloomberg. This is Bloomberg 0:12:47.600 --> 0:12:49.640 day Break Weekend, our global look ahead at the top 0:12:49.679 --> 0:12:52.679 stories for investors in the coming week. I'm Tom Busby 0:12:52.720 --> 0:12:55.040 in New York. Up later in our program, we look 0:12:55.080 --> 0:12:57.840 ahead to an important policy decision from the Preserve Bank 0:12:57.840 --> 0:13:02.320 of Australia. But first JUCHS policymakers convening this week to 0:13:02.320 --> 0:13:05.360 make their last interest rate decision of twenty twenty five. 0:13:05.760 --> 0:13:10.360 That's against a backdrop dominated by political uncertainty amid governmental 0:13:10.440 --> 0:13:13.560 challenges in France and looming US tariffs. Could the rate 0:13:13.600 --> 0:13:17.880 path ahead be more slippery than first anticipated? Well, for more, 0:13:18.000 --> 0:13:20.480 let's go to London and bring in Bloomberg daybreak, europe 0:13:20.480 --> 0:13:22.479 Banker Caroline hepger. 0:13:22.480 --> 0:13:25.160 Tom the European Central Bank is likely to cut interest 0:13:25.240 --> 0:13:29.400 rates again at its December meeting. Policymakers made debates a 0:13:29.440 --> 0:13:33.800 bigger than usual move, but comments from individuals suggests that 0:13:33.880 --> 0:13:37.280 they will proceed with caution for now. Speaking during a 0:13:37.320 --> 0:13:41.319 recent television interview, the Bank of Latvia, Governor Martin's Kazakhs 0:13:41.679 --> 0:13:44.920 said that uncertainty is still very high, with a number 0:13:44.920 --> 0:13:50.000 of complex geopolitical risks facing Europe. Governing Council member Joachim 0:13:50.120 --> 0:13:55.400 Nagel has suggested interest rates should converge only slowly towards 0:13:55.600 --> 0:13:59.360 neutral territory, so support for a fifty basis point move 0:13:59.520 --> 0:14:04.160 does seem limited. Layer onto that, the political crisis in France, 0:14:04.240 --> 0:14:08.040 one of the bloc's biggest members after Michelle Barnier, became 0:14:08.080 --> 0:14:12.120 the shortest serving prime minister in French history, his government 0:14:12.200 --> 0:14:16.160 collapse following a vote of no confidence, crucially before a 0:14:16.240 --> 0:14:21.280 budget could be agreed in parliament. The fiscal unpredictability of 0:14:21.320 --> 0:14:25.320 Europe is something ECB policymakers will have to consider their 0:14:25.400 --> 0:14:29.600 upcoming meeting Bloomberg. Stephen Cowl and I discussed this with 0:14:29.720 --> 0:14:33.440 Maria Demerzis, who is program leader at the Conference Board 0:14:33.680 --> 0:14:38.040 and professor of Economic policy at the European University Institute. 0:14:38.200 --> 0:14:41.800 Well, I mean, the first thing is that we need 0:14:41.800 --> 0:14:45.080 to understand who will govern France, and the issue is 0:14:45.160 --> 0:14:47.880 that President mccran will not be able is not allowed 0:14:47.880 --> 0:14:50.880 constitution to call elections again, given that he's called elections 0:14:50.880 --> 0:14:53.400 back in June. So that means that for one year 0:14:53.920 --> 0:14:57.400 from since last June, that means that till next June, 0:14:57.400 --> 0:15:00.520 we will have to have a technocratic government, another prime 0:15:00.520 --> 0:15:04.280 minister or a technocratic government that actually does the government 0:15:04.360 --> 0:15:06.480 business right, and that means that we will have to 0:15:06.480 --> 0:15:10.320 operate with the current budget and political decisions will not 0:15:10.480 --> 0:15:13.280 be a Difficultulican decisions will not be made. So I 0:15:13.320 --> 0:15:16.600 think that is what I foresee till next Shuar, when Persson. 0:15:16.640 --> 0:15:19.120 Macron will have the chance again to call elections. 0:15:19.200 --> 0:15:21.960 Italy may be used to having a technocratic government, France 0:15:22.000 --> 0:15:26.160 certainly is not. And the budget deficit is the main challenge. 0:15:26.240 --> 0:15:28.560 It is expected to run at six point one percent 0:15:28.600 --> 0:15:31.960 this year. How significant an issue is this going to 0:15:31.960 --> 0:15:35.960 be for Europe to have this continued uncertainty and instability 0:15:35.960 --> 0:15:36.480 in France. 0:15:36.680 --> 0:15:39.400 Indeed, it's not good, and in fact, the reason why 0:15:39.400 --> 0:15:41.520 we are in this position here is indeed because Prime 0:15:41.520 --> 0:15:44.520 Minister Mariner was trying to put a budget forward that 0:15:44.560 --> 0:15:46.200 it was going to take us back in the right 0:15:46.360 --> 0:15:49.200 direction and in compliance with the European rules that have 0:15:49.280 --> 0:15:52.400 come into operations since September. All of this is postponed. 0:15:52.440 --> 0:15:55.760 Now will have to wait for the next government of 0:15:55.760 --> 0:15:57.760 French government to actually do the job, but it will 0:15:57.760 --> 0:15:59.760 have to be done, and the European Commission will be 0:15:59.800 --> 0:16:02.720 what very closely. I remind you that France is under 0:16:02.760 --> 0:16:06.640 the excessive deficit procedure, which is the corrective arm of 0:16:06.640 --> 0:16:10.400 the monitoring process of the European Union, and that means 0:16:10.440 --> 0:16:13.040 that the European Commission will be watching very carefully. 0:16:12.840 --> 0:16:17.440 What happens with the EU Commission's reaction to this if 0:16:17.480 --> 0:16:19.840 we do end up in this situation where they're rerunning 0:16:19.840 --> 0:16:21.720 the current budget, which means the effort is going to 0:16:21.720 --> 0:16:24.600 be far above what had been submitted and approved by 0:16:24.600 --> 0:16:26.920 the Commission in the pre budget rules. I mean, what 0:16:26.960 --> 0:16:29.080 are the next steps of the Commission can take If 0:16:29.120 --> 0:16:32.160 they're on this temporary holding pattern for the next potentially 0:16:32.200 --> 0:16:33.160 six months. 0:16:33.040 --> 0:16:36.240 Progressively, it can put off enormous pressure on whatever French 0:16:36.320 --> 0:16:40.440 government is in place to actually do the job. In principal, 0:16:40.440 --> 0:16:44.240 he could also impose fines on the country. In practice, 0:16:44.240 --> 0:16:46.360 this has never happened, and I don't think it will happen, 0:16:46.400 --> 0:16:50.520 given also what we call the French exceptionalism. But I 0:16:50.600 --> 0:16:53.280 think the pressure for France to deliver is going to 0:16:53.280 --> 0:16:56.360 recommend any is going to come also from other countries 0:16:57.040 --> 0:16:59.640 because there is in fact there's good reasons. What we 0:16:59.680 --> 0:17:01.600 have is rules in the European Union, and if a 0:17:01.640 --> 0:17:04.879 country like France, which is big, actually violates the rules, 0:17:04.920 --> 0:17:07.359 this isn't good either for the history of the rules 0:17:07.800 --> 0:17:09.240 or indeed for the European economy. 0:17:09.400 --> 0:17:12.199 The Conference Board keeps close tabs on the views of 0:17:12.280 --> 0:17:15.359 CEOs within Europe, looking at the stock market as a 0:17:15.359 --> 0:17:19.960 measure there obviously European stocks, particularly French equities, have been suffering, 0:17:20.720 --> 0:17:22.520 but we've seen a bit of a bounce in recent 0:17:22.680 --> 0:17:25.840 days and Germany's let to DAX has done actually recently 0:17:25.920 --> 0:17:29.280 well year to date this year, which seems quite strange 0:17:29.280 --> 0:17:33.919 given the pessimism that CEOs do have on European economic growth. 0:17:34.200 --> 0:17:36.600 Indeed, the CEOs actually tell us that they're in a 0:17:36.840 --> 0:17:39.080 recent service that we've done, they tell us that they 0:17:39.119 --> 0:17:42.800 actually prefer to operate outside Europe because I think conditions 0:17:42.920 --> 0:17:45.840 European economic conditions in Europe are not are very favorable. 0:17:45.920 --> 0:17:48.600 It's consistent also with the Charun account numbers that we 0:17:48.680 --> 0:17:52.360 see business conditions in Europe, you know they could be improved, 0:17:52.359 --> 0:17:55.159 and this is exactly what drag you. Of course, the 0:17:55.200 --> 0:17:57.640 mission of Draguar was very much to find the policies 0:17:57.640 --> 0:18:00.200 that we need to put in place for this to change. 0:18:00.560 --> 0:18:04.440 Is there actually any political currency though, to implement any 0:18:04.480 --> 0:18:06.919 of those recommendations. I mean, we saw the commission point 0:18:07.040 --> 0:18:09.439 to the Dragy Report and the other reports that have 0:18:09.440 --> 0:18:11.880 been done on competitiveness in the European Union as well. 0:18:11.920 --> 0:18:14.719 But realistically, if the national capitals aren't kind of up 0:18:14.760 --> 0:18:17.879 there and pushing it, and particularly France and Germany, nothing's 0:18:17.880 --> 0:18:18.680 really going to get done. 0:18:18.840 --> 0:18:21.480 It is true that we need France and Germany to 0:18:21.480 --> 0:18:26.120 act as as Germany as in a coalition of change. 0:18:26.240 --> 0:18:28.640 We need them, and you know, with both actually countries 0:18:28.640 --> 0:18:32.919 now in political instability, things won't move very fast. However, 0:18:32.920 --> 0:18:34.719 what I will say is that that the CEOs are 0:18:34.720 --> 0:18:36.640 telling us that if there's one change that they won't 0:18:36.720 --> 0:18:40.600 happen is simplification of the regulation. This is actually the 0:18:40.680 --> 0:18:42.879 top number one priority that they tell us is this, 0:18:43.480 --> 0:18:45.879 And what we saw actually the European Commission has actually 0:18:45.920 --> 0:18:49.560 put the point of the agenda very high in the priorities. 0:18:49.880 --> 0:18:52.160 So I would be very curious to see how they 0:18:52.320 --> 0:18:53.240 aim to implement this. 0:18:53.520 --> 0:18:55.359 Yeah, I mean I suppose speed is also the other 0:18:55.480 --> 0:18:57.320 question involved in this, as well as how fast they 0:18:57.440 --> 0:18:58.320 be able to do something. 0:18:58.359 --> 0:18:59.800 I wonder does something. 0:18:59.480 --> 0:19:01.520 Like the twin three e g. In this idea of 0:19:01.520 --> 0:19:04.840 creating a separate corporate structure that could operate across member states. 0:19:04.960 --> 0:19:07.000 I mean that's the sort of idea that does that 0:19:07.000 --> 0:19:09.560 get CEO as excited. Is that a policy they could 0:19:09.600 --> 0:19:10.320 get on board with? 0:19:10.920 --> 0:19:13.680 Yes, But like I say, I mean the CEO's understand 0:19:14.200 --> 0:19:16.800 how slowly europe movies. The twenty eighth regime is an 0:19:16.840 --> 0:19:18.560 idea that has been around for a very long time, 0:19:18.760 --> 0:19:22.160 particularly with regards to the creation of the Capital Markets Union. 0:19:22.760 --> 0:19:24.960 We've made very little progress in this respect. I think 0:19:25.000 --> 0:19:29.399 CEOs want tangible change, and this type of change, the 0:19:29.400 --> 0:19:32.119 certification of regulation, is something that can, in principle happen. 0:19:32.119 --> 0:19:35.200 It doesn't require money, it doesn't require much agreement. Of course, 0:19:35.240 --> 0:19:38.159 it does require parliamentary approval, but everybody agrees on this, 0:19:38.200 --> 0:19:39.840 So I think this is one of the low hanging fruits. 0:19:39.840 --> 0:19:42.479 So if we get ourselves to implement it, we can 0:19:42.520 --> 0:19:43.359 actually make change. 0:19:43.400 --> 0:19:43.720 Yeah. 0:19:43.960 --> 0:19:46.920 My thanks to Maria Demerzis, who is program leader at 0:19:46.920 --> 0:19:50.280 the Conference Board and professor of Economic policy at the 0:19:50.359 --> 0:19:55.320 European University Institute, someone who spends time in both Brussels 0:19:55.400 --> 0:19:59.800 and Florence. So, after the failure of Barnier's administration, which 0:20:00.040 --> 0:20:04.800 injects uncertainty and perhaps more austerity into France, how will 0:20:04.840 --> 0:20:09.120 the ECB choose to rebuild is something I asked Bloomberg's 0:20:09.240 --> 0:20:12.720 senior reporter covering the Central bank yall around out. 0:20:13.160 --> 0:20:17.480 I think France in itself is another source of uncertainty, 0:20:17.560 --> 0:20:22.359 of course, and there are already plenty other sources out there, 0:20:22.400 --> 0:20:24.000 and I'm sure we will get a chance to talk 0:20:24.000 --> 0:20:29.040 about that when it comes to the decision itself in 0:20:29.440 --> 0:20:33.119 the coming days. That of course will will not be 0:20:33.640 --> 0:20:36.920 affected by what we're seeing in France, but of course 0:20:36.960 --> 0:20:41.080 the the economic outlook very much will both the French economy, 0:20:41.640 --> 0:20:44.439 which of course is the is the Eurozone's second largest, 0:20:44.440 --> 0:20:47.560 and the Eurozone economy itself. They're not doing very well 0:20:47.560 --> 0:20:52.240 at the moment. Pmis are deep in contractionary territory, and 0:20:53.200 --> 0:20:58.240 uncertainty of this caliber weighs on consumption, it weighs on investment, 0:20:58.560 --> 0:21:02.200 It stands in the way of of reforms. The absence 0:21:02.200 --> 0:21:05.240 of a government in France, of course, means fiscal policy 0:21:05.320 --> 0:21:09.480 is very much a wildcard, and also an important voice 0:21:09.520 --> 0:21:12.360 is missing at the European level, So a lot more 0:21:12.440 --> 0:21:16.119 uncertainty to you know, in the future. To be aware 0:21:16.160 --> 0:21:19.040 of that will change the way the EACP looks at 0:21:19.080 --> 0:21:22.000 the economy and the economic outlook and the risks associated 0:21:22.000 --> 0:21:24.480 to that outlook, But not much of an impact on 0:21:24.520 --> 0:21:25.359 the decision itself. 0:21:25.359 --> 0:21:28.200 I would say, yeah, okay, but the possibility of an 0:21:28.200 --> 0:21:31.240 economic drag perhaps further down the road. So, in terms 0:21:31.240 --> 0:21:35.480 of this upcoming meeting, do we expect twenty five basis 0:21:35.520 --> 0:21:38.320 points or could we see a fifty basis point rate reduction? 0:21:38.760 --> 0:21:41.640 Yeah? I think twenty five is what I would bet 0:21:41.680 --> 0:21:47.439