00:00♪ > > NEWSMAKERS AND MARKET MOVERS, THIS IS "THE PULSE WITH FRANCINE LACQUA." FRANCINE: GOOD MORNING. WELCOME TO "THE PULSE." I AM FRANCINE LACQUA HERE IN LONDON AND HERE IS COMING UP. A FOUR-DAY PAUSE IN FIGHTING BETWEEN ISRAEL AND HAMAS BEGINS. 50 ISRAELI HOSTAGES AND 150 PALESTINIAN PRISONERS ARE DUE TO BE RELEASED AS PART OF THE DEAL. -- RELEASED WITH MORE AID ALLOWED INTO GAZA. GERMANY AGAIN SUSPENDS A CONSTITUTIONAL LIMIT ON BORROWING AMID THE COUNTRY'S BUDGET TURMOIL. PLUS, BARCLAYS REPORTEDLY CUTTING COSTS BY AS MUCH AS ONE BILLION POUNDS, WITH 2000 JOBS ON THE LINE. HAPPY FRIDAY. THERE'S A LOT TO GET THROUGH, AND A LOT OF NEWS AND WE HAVE A PACK SHOW SO LET'S START WITH THE EUROPEAN MARKETS MAP. A LOT OF THE FOCUS IS ON THE ECONOMIC PICTURE THAT IS DARKENED. WE ARE GETTING SOME IFO FIGURES ACROSS THE BOARD. THIS LATEST ECONOMIC DATA REALLY HIGHLIGHTS GERMANY'S STRUGGLE TO ACTUALLY RECOVER FROM AN ENERGY INDUCED DOWNTURN LAST WINTER. AND OF COURSE, WE WILL GET THE IMPACT OF HIGHER BORROWING COSTS. IF YOU LOOK AT THE STOXX EUROPE 600, PRETTY MUCH LITTLE CHANGE. TREASURIES DECLINING AFTER TRADING RESUMED FOLLOWING A HOLIDAY. THAT IS VERY LATEST ON SOME OF THESE FIGURES. IFO BUSINESS CONFIDENCE INDEX BELOW THE ESTIMATE. WE WILL BE SPEAKING TO THE PRESIDENT OF THE IFO INSTITUTE A LITTLE BIT LATER ON IN THE PROGRAM. WE WILL TALK BUDGET, WE WILL TALK ABOUT THE ECONOMY, AND WHAT THE FAULTLINES FOR GERMANY ARE. THAT INTERVIEW AT 9:30 A.M. U.K. TIME. ABOUT MISS IN THE MIDDLE EAST AND A FOUR-DAY PAUSE IN FIGHTING BETWEEN ISRAEL AND HAMAS BEGINS. IT SETS THE STAGE FOR THE EXCHANGE OF DOZENS OF HOSTAGES HELD BY MILITANTS IN GAZA IN RETURN FOR PALESTINIANS IMPRISONED BY ISRAEL. FOR MORE, LET'S GET STRAIGHT TO BLOOMBERG'S SAM DECKARD. WHAT'S BEEN HAPPENING ON THE GROUND SINCE THE TRUCE CAME INTO EFFECT AND WHAT CAN WE ACTUALLY EXPECT? SAM: THANK YOU, FRANCINE. GOOD TO BE WITH YOU. THE TRUCE SEEMS TO BE HOLDING SO FAR. WE ARE FIVE HOURS IN. THE NEXT SORT OF IMPORTANT THING TO LOOK OUT FOR IS IN FOUR HOURS WHEN WE ARE EXPECTING 13 ISRAELI HOSTAGES HELD BY HAMAS, WOMEN AND CHILDREN, TO BE EXCHANGED FOR 39 PRISONERS HELD BY ISRAEL, ALSO INCLUDING WOMEN AND CHILDREN AND TEENAGERS AS YOUNG AS 14. OBVIOUSLY, THE INTERNATIONAL COMMUNITY OF THE RED CROSS WILL PLAY A KEY ROLE IN ALL OF THIS. SO FAR, THE TRUCE APPEARS TO BE HOLDING. AID HAS COME IN THREE EGYPT, FOOD, MEDICINE, FUEL, COOKING GAS AND WE HAVE SEEN THESE INCREDIBLE IMAGES OF PALESTINIANS EMERGING FROM WEEKS OF A HIDING, OF SHELTERING UNDER ISRAELI BOMBARDMENT. THEY ARE OUT ON THE STREETS LOOKING BEDRAGGLED, TIRED, WITH THEIR BELONGINGS. SOME TRIED TO GO BACK TO THE NORTH, WHICH ISRAEL HAD EVACUATED AT THE BEGINNING OF THIS MILITARY OPERATION, BUT THE ARMY HAS SAID NOBODY SHOULD COME BACK NORTH. IT WANTS TO MAKE SURE THAT WHOEVER IS LEFT IN THE NORTH LEAVES, PARTICULARLY THE WOUNDED AT THE HOSPITALS. THE SITUATION IS DIRE. THE HEALTH AUTHORITIES IN GAZA, THE MINISTRY CONTROLLED BY HAMAS , SAYS THE DEATH TOLL IS OVER 15,000 SINCE OCTOBER 7. THE WOUNDED IN THE TENS OF THOUSANDS. ARAB, THE UNITED NATIONS AND ARAB STATES HAVE COME OUT THIS LAST NIGHT AND THIS MORNING CALLING FOR A PERMANENT CEASE-FIRE. THEY ARE PUTTING PRESSURE ON WESTERN ALLIES. WE HAD SAUDI OFFICIALS SPEAK TO THEIR COUNTERPARTS IN THE U.K. AND U.S. IN THE PAST FEW HOURS. WE HAVE SOME STRONG STATEMENTS FROM THE UNITED NATIONS, WE HAVE THE COMMISSIONER GENERAL OF THEU.N. AGENCY RESPONSIBLE FOR PALESTINIANS IN GAZA, HE WAS THERE LAST NIGHT AND HE SAID PEOPLE ARE EXHAUSTED AND LOSING HOPE IN HUMANITY. THEY NEED RESPITE. THEY DESERVE TO SLEEP WITHOUT BEING ANXIOUS OF WHETHER THEY WILL MAKE IT THROUGH THE NIGHT, END OF QUOTE. FRANCINE: THANK YOU SO MUCH FOR THE UPDATE. WE CONTINUE FOLLOWING AND OUR HEART GOES OUT TO EVERYONE ON THE GROUND. SAM WITH THE VERY LATEST FROM HAMAS-ISRAEL GERMANY'S ECONOMY CONTRACTED 0.1% IN THE THREE MONTHS TO SEPTEMBER AS THE COMPANY LANGUISHES IN WHAT THE BANK RECKONS MAY BE A RECESSION. EUROPE'S LARGEST ECONOMY IS SET TO SUSPEND ITS BORROWING LIMIT FOR A FOURTH CONSECUTIVE YEAR. JOINING US NOW IS PAUL DONOVAN, GLOBAL CHIEF ECONOMIST AT UBS. THANK YOU BOTH FOR JOINING US. HOW WORRIED ARE YOU ABOUT THE GERMAN ECONOMY? AND GOOD MORNING. PAUL: GOOD MORNING. WELL, I THINK THE GERMAN ECONOMY IS SUFFERING OBVIOUSLY FROM BEING MORE DEPENDENT ON ENERGY COMING OUT OF RUSSIA, THAT'S BEEN ITS FIRST NEGATIVE BUT ALSO THE GLOBAL CONSUMER SWITCH WE HAVE BEEN SEEING WHERE CONSUMERS , HAVING HAD THIS PHENOMENAL BOOM IN DEMAND BACK IN 2021, THEY SWITCHED TO SPENDING ON HAVING FUN, TOURISM AND CONCERTS AND ALL THAT SORT OF THING. OF COURSE, GERMANY'S EXPORTS ARE BIASED MORE TOWARDS THE GOODS THAN THE FUN SIDE OF THAT EQUATION. THAT SHIFT HAS A BIT OF A BEARING. I THINK IT'S IMPORTANT TO REMEMBER WHEN WE GET WORKED UP ABOUT, OH, IS GROWTH NEGATIVE FOR TWO QUARTERS? GERMANY HAS A FALLING POPULATION. THAT MEANS IT IS MORE PRONE TO HAVE EPISODES OF NEGATIVE GROWTH WITHOUT A FALL IN LIVING STANDARDS. WE NEED TO PUT IN PERSPECTIVE THE DEMOGRAPHIC ISSUE GERMANY IS EXPERIENCING. I THINK THAT WHILE GERMANY IS IN A WEAK POSITION, IT IS NOT IN A DIRE POSITION. FRANCINE: NOUR? > > I AGREE WITH PAUL. . WE HAD PMI'S DATA THAT CAME OUT YESTERDAY THAT SHOWED THE DOWNTURN EASING IN NOVEMBER. WE STILL HAVE THAT INFLATION PROBLEM. THEY ARE IN A VERY MUCH STAGFLATIONARY ENVIRONMENT BUT IT'S NOT JUST GERMANY, IT'S THE EURO AREA AS A WHOLE. IT IS SOMETHING THE ECB HAS TO DEAL WITH. POLICYMAKERS ARE PUSHING BACK ON THOSE VERY DOVISH BETS FROM MONEY MARKETS EXPECTING THOSE CENTRAL BANKS TO CUT RATES AS SOON AS NEXT YEAR, WHEREAS POLICYMAKERS ARE STILL HOLDING ONTO THAT 2% INFLATION TARGET. WITH THOSE DYNAMICS, I FIND THAT VOLATILITY IN THE BOND MARKET IS STILL VERY MUCH GOING TO PERSIST INTO NEXT YEAR. FRANCINE: WHEN ARE YOU EXPECTING THE FIRST CUTS FROM THE ECB BUT ALSO FROM THE FED? PAUL: THE ECB WILL BE FIGHTING IT OUT AS TO WHICH IT GETS THERE FIRST IN THE LATE SECOND QUARTER OF NEXT YEAR. I THINK THE BANK OF ENGLAND WILL ACTUALLY BE THE FIRST TO CUT RATES. THE BANK OF ENGLAND HAS AN ADVANTAGE THAT IT IS RUN BY QUALIFIED ECONOMISTS AND SOMEBODY WHO IS PREPARED TO LOOK FORWARD. I THINK THE PROBLEM WITH BOTH THE ECB AND THE FED SAYS WE ARE DATA DEPENDENT. WE KNOW ECONOMIC DATA HAS BECOME STEADILY LESS RELIABLE IN RECENT YEARS. YOU CAN VERY EASILY GET A ROGUE NUMBER AND THAT COULD DELAY THE RATE CUT FROM THE ECB OR THE FED, AND THE FOLLOWING MONTH, THE NUMBER IS CORRECTED AND THE CENTRAL BANK ENDS UP LOOKING FOOLISH. FRANCINE: WHEN YOU LOOK AT SOME OF GUESS THE DYNAMICS GOING FORWARD, WHAT IS THE BIGGEST MISTAKE THAT WE COULD DO HERE IN EUROPE? I KNOW THERE IS DIFFERENT ECONOMIES AND THEY ARE QUITE ECLECTIC AND THEY ARE DIFFICULT TO DEAL WITH BECAUSE OF THE DIFFERENT DYNAMICS. BUT WHAT DOES A MISTAKE FROM THE EUROPEAN CENTRAL BANK LOOK LIKE NOW? PAUL: I THINK A CONCERN FOR ME WOULD BE THAT THE ECB REMAINS AS BACKWARD LOOKING AS IT IS. THE WHOLE POINT ABOUT A PROPERLY RUN CENTRAL BANK IS YOU ARE FORWARD-LOOKING. YOU ARE SAYING YES, INFLATION IS ABOVE TARGET NOW, BUT WE KNOW MONETARY POLICY OPERATES WITH LONG LAGS. WHERE IS INFLATION GOING? WHEN WE LOOK AT THE COMPOSITION OF INFLATION, THE DURABLE GOODS PRICE OF INFLATION, THE TRANSITORY INFLATION, THAT IS OVER. WE'VE GOT THE PROFIT LED INFLATION, WHICH IS REALLY NOW STARTING TO BE SQUEEZED. WE SEE PRESSURE ON MARGINS. PROFIT EXPANSION IS COMING UNDER ATTACK FROM CONSUMERS WHO ARE NOT WILLING TO ACCEPT IT. I THINK THE MOMENTUM OF INFLATION CONTINUES TO BE DOWNWARDS. IT WON'T NECESSARILY BE A SMOOTH TRAJECTORY BUT THE DIRECTION OF TRAVEL SEEMS CLEAR. I THINK IF THE ECB IGNORES THAT AND KEEPS LOOKING IN THE REARVIEW MIRROR, THEN IT IS GOING TO KEEP INTEREST RATES TOO HIGH FOR TOO LONG. FRANCINE: COULD THAT ALSO OF COURSE LEAD TO MORE VOLATILITY AS MARKETS PRICE IN SOMETHING AND THEN HAVE TO WALK IT BACK? NOUR: ABSOLUTELY. YOU SEEN THAT PUSH AND PULL, NOT JUST WITH CENTRAL BANK POLICYMAKERS, BUT ALSO WITH GOVERNMENTS THAT HAVE BEEN ISSUING WITH THE QUESTION OF SUPPLY, BOND VIGILANTES, ALL OF THESE THEMES WILL CONTINUE IN 2024. WE HAD THAT NEWS OUT OF GERMANY YESTERDAY. LAST YEAR, WE'VE HAD A LOT OF THESE INSTANCES WHERE THE MARKET HAS REALLY PUSHED BACK ON THOSE PLANS OF FISCAL SPENDING FROM GOVERNMENTS, WHEREAS THE MONETARY POLICY ASPECT OF THINGS IS REALLY FOCUSED ON THAT INFLATIONARY AND BACKWARD LOOKING VIEW. YES, INFLATION HAS BEEN EASING. BUT YOU DO FIND THAT THERE IS SOME PERSISTENCE IN IT THAT IS QUITE CONCERNING FOR CENTRAL BANKERS. PARTICULARLY AS THEY HAVE WAGED THE MOST AGGRESSIVE TIGHTENING CYCLE THAT WE HAVE SEEN IN DECADES. TO WALK BACK ON THAT SO SOON MIGHT SEEM RATHER, YOU KNOW, MISPRICED FOR THOSE POLICYMAKERS. THEY WANT TO MAKE SURE THAT INFLATION IS COMPLETELY IN THE REARVIEW MIRROR BEFORE THEY HAVE TO GO ON AND LOOK AT THINGS LIKE FINANCIAL STABILITY, WHICH IS VERY MUCH AN IMPORTANT MANDATE FOR THEM. WE HAVE SEEN THEM REACT, WHETHER THE BANK OF ENGLAND OR THE FED, WOULD HAVE SEEN THEM REACT FROM THE SVB, TO THE FALLOUT WE HAD LAST YEAR. I FIND CENTRAL BANKS ARE STILL IN A VERY TRICKY SITUATION. THEY ARE NOT RESPONDING TO AND THEY ARE NOT HERE TO CLOSE OUT SPREADS, RIGHT, AS THAT FAMOUS LINE WE HAVE HAD FROM THE ECB. THEY ARE HERE TO MAKE SURE THEIR MANDATES ARE FULFILLED AND THAT IS THE INFLATION AND FINANCIAL STABILITY TARGET AND THAT WILL CONTINUE TO BE A THEME INTO NEXT YEAR. FRANCINE: THANK YOU SO MUCH. NOUR WILL BE BACK WITH PAUL DONOVAN, GLOBAL CHIEF ECONOMIST AT UBS. THIS IS BLOOMBERG. ♪ FRANCINE: WELCOME BACK. LET'S TALK BANKS AND TURN TO BARCLAYS. A REUTERS REPORT SAYING THE BANK IS WORKING ON A COST-CUTTING PLAN OF UP TO ONE BILLION POUNDS. AN ESTIMATED 2000 JOBS COULD BE ON THE LINE. LET'S GET TO TOM METCALF, WHO OVERSEES FINANCE COVERAGE IN EUROPE. WHAT DO WE KNOW ABOUT THE PROPOSALS AND IS THAT A SURPRISE? > > SOME INTERESTING SPECIFICS. IN TERMS OF THOSE, THEY ARE LOOKING AT CUTTING ABOUT ONE BILLION POUNDS OF COSTS OVER THE NEXT SEVERAL YEARS, ACCORDING TO REUTERS. AS PART OF THAT, THEY WOULD SAY AS MANY AS 2000 JOBS WOULD GO IN BARCLAYS' BACK OFFICE. THIS HAS KIND OF BEEN WELL FLAGGED, NOT A HUGE SURPRISE, AND YOU CAN SEE THAT IN THE SHARE PRICE, NOT A BIG BUDGET. THIS IS ALMOST LIKE A PLACEHOLDER. WE ARE EXPECTING A MUCH BIGGER OVERHAUL. FOR ME, THAT IS THE KEY QUESTION, HOW MUCH FURTHER CAN THE CEO AND BARCLAYS MANAGEMENT TEAM GO? THIS IS THEIR FIRST SORT OF OFFER I SUPPOSE AND IT LOOKS LIKE THEY NEED TO DO A LOT MORE. FRANCINE: TOM METCALF OVERSEEING ALL OF OUR FINANCE COVERAGE ACROSS EUROPE. STILL WITH US, PAUL DONOVAN, GLOBAL CHIEF ECONOMIST AT UBS. AWAY FROM THE BANKS, THIS IS A STORY OF INTEREST RATES. WHAT ARE YOU EXPECTING THE FED TO DO? WHEN YOU LOOK AT CONSUMPTION, IT SEEMS TO BE HOLDING OK. THERE IS THIS SIX-MONTH WEIRDNESS WHERE EVERY SIX MONTHS, AND FEELS LIKE WE ARE EXPECTING A DOWNTURN, THE CONSUMER HOLDS ON, MARKETS REPRICE WHAT THE FED DOES. PAUL: I THINK ON THE CONSUMER STORY, WHAT THE MARKET PERIODICALLY MISSES IS THE FACT THAT THE MIDDLE INCOME CONSUMER IS ACTUALLY IN A RELATIVELY GOOD PLACE OVERALL. AND THAT IS WHAT IS SOFTENING THE NATURE OF THE SLOWDOWN. THERE IS A SLOWDOWN. UNFORTUNATELY -- SOFTISH LANDING NEXT YEAR. UNFORTUNATELY, LOWER INCOME GROUPS ARE NOT IN SUCH A GOOD PLACE. THEY HAVE RUN OUT OF THE POST-PANDEMIC ERA SAVINGS. THEY ARE MORE RELIANT ON CREDIT IN ORDER TO SURVIVE, THEIR FACING HIGHER RENTS AND SO ON. IF YOU ARE A MIDDLE INCOME HOUSEHOLD IN THE UNITED STATES TODAY AND YOU OWN YOUR OWN HOME, THAT'S THE CRITICAL CAVEAT, UNLESS YOU LIVE IN FLORIDA, YOUR INFLATION RATE IS SOMEWHERE BETWEEN 1% AND 2%. YOUR REAL SPENDING POWER, YOUR ABILITY TO CONSUME IS BETTER THAN THE HEADLINE NUMBER SUGGESTS. THAT'S BEEN THE THING WHICH HAS BEEN I THINK DECEIVING THE MARKETS A LITTLE BIT. THE KEY POINT IS THAT THE INFLATION REALITY IS LOWER AND SO THAT MEANS THAT THE CONSUMER IS THAT BIT MORE RESILIENT. FRANCINE: HOW LONG CAN THAT STAY? IS THERE GOING TO BE A BIG DOWNTURN? DO YOU THINK THE CONSUMER CONTINUES SPENDING, MUDDLING THROUGH? PAUL: I THINK THERE WILL BE A SLOWDOWN. WE ARE IN A SITUATION WHERE FOR 2023, THE CONSUMER HAS BEEN VERY MUCH REDUCING THEIR SAVINGS RATE. THEY HAVE NOT NECESSARILY BEEN DIPPING INTO THE MONEY IN THE BANK, BUT WHAT THEY HAVE BEEN SAYING IS WE GOT MONEY IN THE BANK, SO WE DON'T NEED TO SAVE $500 A MONTH, LET'S SAVE $300 A MONTH, AND THEREFORE SPEND THE OTHER 200. THE SAVING RATE HAS GONE DOWN. THAT CANNOT CARRY ON INDEFINITELY. WE ARE PROBABLY COMING TO THE LIMIT RIGHT NOW. WHAT THAT MEANS IS WE NEED TO SEE REAL WAGE GROWTH COME IN TO SUPPORT THE CONSUMER. AND FOR THE FIRST TIME SINCE THE PANDEMIC, WE ARE FINALLY, FINALLY SEEING SOME REAL WAGE GROWTH. THAT DOES NOT GIVE YOU A COLLAPSE, IT DOES NOT GIVE YOU A SLUMP. THE FACT THAT YOU ARE RUNNING OUT OF THE ABILITY TO KEEP REDUCING YOUR SAVINGS RATE, THAT IS PROBABLY GOING TO PUSH US BELOW TREND GROWTH. I THINK THAT'S WHAT WE'VE GOT TO THINK ABOUT NEXT YEAR, IT IS A BELOW TREND GROWTH ENVIRONMENT, BUT IT IS NOT DESPERATELY BELOW TREND. WE ARE NOT IN RECESSION OR A DEEP SLOWDOWN OR ANYTHING LIKE THAT. FRANCINE: PAUL, IS THERE SOMETHING THAT, YOU KNOW, WE TALK A LOT ABOUT PRODUCTIVITY, WE ALSO HAD THE AUTUMN STATEMENT IN THE U.K. TWO DAYS AGO. WHAT WOULD YOUR TEMPLATE BE FOR THE U.K. TO GROW? I KNOW YOU WERE TALKING ABOUT THE BANK OF ENGLAND, THE FACT THAT THEY HAVE ADULTS IN THE ROOM, AND MAYBE THEY WILL BE UPFRONT AND CUT WHEN THEY NEED TO COMPARED TO OTHER CENTRAL BANKS. PAUL: YES, SO I THINK THE SITUATION IN THE U.K. IS THAT WE HAVE ONGOING FISCAL TIGHTENING. WE HAVE QUITE SIGNIFICANT FISCAL TIGHTENING AS WE GO INTO NEXT YEAR. THAT IS OBVIOUSLY A FAIRLY STRONG HEADWIND TO ECONOMIC ACTIVITY. THE OTHER THING WE'VE GOT TO BE VERY MUCH AWARE WITH I THINK WITH THE BANK OF ENGLAND AND U.K. ECONOMY IS THAT BECAUSE OF THE STRUCTURE OF THE U.K., BECAUSE IT IS AN ECONOMY THAT SORT OF HAS EMBRACED FLEXIBLE WORKING, AND HAS EMBRACED ONLINE RETAIL, AND SO ON, THERE IS ENORMOUS CHANGE GOING ON IN THE ECONOMY AND WE KNOW THAT THE DATA DOES NOT CAPTURE THIS. THE OFFICE OF NATIONAL STATISTICS COMPLETELY CHANGED THE NARRATIVE IN THE U.K. A COUPLE OF MONTHS AGO, IT WAS NOT A WEEK POST-PANDEMIC RECOVERY, WE ARE DOING ACTUALLY PRETTY WELL BY THE STANDARDS OF THE G7. THEY DID THAT JUST BY DISCOVERING GROWTH THAT HAD PREVIOUSLY BEEN MISSING BECAUSE THE STRUCTURAL CHANGES WERE DISGUISING IT. WE'VE GOT TO BE A LITTLE BIT CAREFUL IN ASSUMING HOW BAD THINGS ARE GOING TO BE NEXT YEAR. WITHIN THE FISCAL TIGHTENING AND REMEMBER, OF COURSE, DON GOING HIGHER INTEREST RATE SAGA, THAT IS GOING TO BE A CONSTRAINT. THAT SO I THINK THE BANK IS GOING TO MOVE TO EASE BACK A BIT SECOND QUARTER NEXT YEAR. FRANCINE: THANK YOU SO MUCH. PAUL DONOVAN, GLOBAL CHIEF ECONOMIST AT UBS. WE WILL HAVE PLENTY MORE ON THIS THROUGHOUT THE DAY. THIS IS BLOOMBERG. ♪ FRANCINE: IT IS A WEEK TO GO UNTIL COP 28 KICKS OFF INTO BY. THE U.N. BODY TASKED WITH SETTING UP A NEW CARBON CREDITING MECHANISM WILL PRESENT CRUCIAL GUIDANCE TO THE CONFERENCE. THE AGREEMENT WOULD BECOME OPERATIONAL NEXT YEAR. WE ARE JOINED BY STAFFORD CAPITAL PARTNERS ANGUS WHITELEY. THERE'S A LOT OF CONCERNS ABOUT SOME OF THE VOLUNTARY CARBON PUTTING OUT THERE, LIKE THE FIGURES WERE NOT HARMONIOUS IN DIFFERENT COUNTRIES AND THEY DID NOT ACHIEVE WHAT WE WANTED THEM TO. WHAT'S THE WAY FORWARD? ANGUS: FIRSTLY, THANK YOU FOR HAVING ME, FRANCINE. I THINK IT'S WORTH JUST SHARING SOME CONTEXT FOR, YOU KNOW, THAT QUESTION AND WHERE WE ARE COMING FROM. IF WE LOOK AT WHAT'S HAPPENED IN 2023, WE HAVE HAD EARLIER IN MARCH THIS YEAR, WE HAD THE IPCC ASSESSMENT REPORT. WE HAVE HAD TEMPERATURES THROUGH THE COURSE OF THE SUMMER WHICH HAVE BEEN GLOBAL RECORDS OF EXTREME TEMPERATURES. THAT HAS CONTINUED AS WE HAVE HAD THE INTERNATIONAL ENERGY AGENCY COMING OUT WITH A REPORT IN SEPTEMBER ABOUT THE ENERGY PATHWAY TO 2050. WE'VE HAD MOST RECENTLY IN THE U.S. A FIFTH NATIONAL CLIMATE ASSESSMENT. ALL OF THE EVIDENCE THAT IS IN PLACE NOW IS THAT WE NEED TO BE ACTING MUCH, MUCH QUICKER THAN WE HAVE BEEN. WE DON'T NEED TO LOOK AT THE TOOL TO ENABLE US TO ACT. YOUR QUESTION ABOUT THE CARBON MARKET AND THE NATURE OF THE VOLUNTARY CARBON MARKET -- FRANCINE: IT'S JUST NOT WORKING. CAN IT BE RESCUED? WHAT'S THE WAY FORWARD? DOES IT HAVE TO BE NOT VOLUNTARY, DO YOU HAVE TO HAVE REGULATION AROUND IT? ANGUS: WELL, LOOK, WE HAVE A MIX OF DIFFERENT MARKETS AT THE MOMENT, WE HAVE VOLUNTARY AND REGULATED MARKETS. ULTIMATELY, WHERE WE NEED TO GET TO IS A POSITION GLOBALLY WHERE WE HAVE A CARBON PRICE. I THINK THE CHALLENGE FOR REACHING THAT POINT IS THAT WE NEED HARMONIZATION AND COLLABORATION ACROSS THE WORLD. THAT, IN TODAY'S WORLD, IS LOOKING LIKE A VERY HARD PATHWAY. WE HAVE REGULATED MARKETS IN CERTAIN PLACES, WE HAVE VOLUNTARY MARKETS IN CERTAIN PLACES, AND WE HAVE THAT CONTEXT WHICH IS PUTTING AN EVER-INCREASING PRESSURE TO COME UP WITH A SOLUTION TO THE CARBON PRICE AND THE CARBON CHALLENGE. I THINK THERE'S PRESSURE THERE. WE NEED COLLABORATION AMONGST COUNTRIES. I THINK THAT IS SOMETHING THAT, YOU KNOW, EVERYBODY COMING TOGETHER AT COP PRESENTS THE OPPORTUNITY FOR PEOPLE TO TALK. FRANCINE: YOU DON'T THINK REGULATION SHOULD ACTUALLY LOOK AT THIS AND CERTAINLY BE MORE DECISIVE, AND YOU KNOW, WITH MORE TEETH? ANGUS: LOOK, I THINK WHAT NEEDS TO HAPPEN IS THAT THIS NEEDS TO HAPPEN ON A GLOBAL BASIS. SO, YES, WE CAN HAVE LOCAL MARKETS AND LOCAL REGULATORS MAKING CHANGE, AND THAT'S A GOOD THING. BUT I THINK WHAT WE NEED TO SEE IS THE HARMONY ACROSS THE GROUP. FRANCINE: THANK YOU SO MUCH. STAFFORD CAPITAL PARTNERS CHIEF EXECUTIVE ANGUS WHITELEY. WE WILL BE BACK WITH MORE. ♪ FRANCINE: A FOUR-DAY PAUSE IN FIGHTING BETWEEN ISRAEL AND HAMAS BEGINS. 50 ISRAELI HOSTAGES AND 150 PALESTINIAN PRISONERS ARE DUE TO BE RELEASED WITH MORE AID ALLOWED INTO GAZA. GERMANY AGAIN SUSPENDS A LIMIT ON BORROWING AMID THE COUNTRY'S BUDGET TURMOIL. WHILE THE COUNTRY'S ECONOMY MINISTER CALLS FOR RADICAL REFORM. PLUS, BARCLAYS REPORTEDLY CUTTING COSTS BY AS MUCH AS ONE BILLION POUNDS, WITH 2000 JOBS ON THE LINE. GOOD MORNING. WELCOME TO "THE PULSE." I'M FRANCINE LACQUA HERE IN LONDON. WE WERE TALKING ABOUT THE CARBON CREDIT MARKET. LET'S CONTINUE THAT DISCUSSION. STILL WITH US, STAFFORD CAPITAL PARTNER CHIEF EXECUTIVE ANGUS WHITELEY WE WERE TALKING ABOUT THE CARBON MARKETS AND I THINK THE OVERARCHING QUESTION IS, DO WE NEED TO CUT ECONOMIC ACTIVITY INSTEAD OF PAYING TO MAKE UP FOR IT WITH THE CARBON CREDITS? ANGUS: LET ME SEE, I THINK CLEARLY WE CANNOT MAKE UP FOR IT BY ISSUING CARBON CREDITS. I THINK THAT WE NEED TO BE REDUCING REAL-WORLD EMISSIONS. WE NEED TO DO THAT IN A WAY THAT, YOU KNOW, REDUCING ECONOMIC ACTIVITY I DO NOT THINK IS THE ANSWER, I DON'T THINK THAT'S THE WAY WE ARE BUILT. I THINK IT IS A QUESTION OF ADDRESSING HOW THESE EMISSIONS ARE PRODUCED AND WHAT IT IS WE DO AND HOW WE DO IT. I HAVE MENTIONED EARLIER THAT WE HAVE HAD THE REPORTS COMING OUT ABOUT THE CHALLENGES THAT WE FACE. I THINK THERE IS CAUSE FOR OPTIMISM FOR WHAT HAS BEEN COMING OUT THROUGH THESE REPORTS AND TO SAY WHAT WE HAVE BEEN DOING WELL. IF YOU LOOK AT THE ELECTRIFICATION OF TRANSPORT, FOR EXAMPLE, I THINK THERE'S BEEN HUGE PRAISE AS TO THE PROGRESS THAT'S BEEN MADE WITH THAT AND I THINK THIS IS PART OF THE SOLUTION. WHAT WE HAVE SEEN IS RECOGNITION THAT THE TECHNOLOGIES THAT CAN ADDRESS THE CHALLENGE ARE NOW, YOU KNOW, I THINK IT WASN'T LONG AGO WHERE WE WERE SAYING WE NEED TO DEVELOP TECHNOLOGIES. A LOT OF TECHNOLOGIES HAVE BEEN DEVELOPED AND IT IS A QUESTION OF IMPLEMENTING THEM. FRANCINE: WHAT IS YOUR BIG EXPECTATION FOR COP28? WHAT ARE YOU HOPING WILL HAPPEN FOR CARBON CREDITS? ANGUS: EXPECTATIONS AND HOPES. I HAVE MENTIONED EARLIER THAT BRINGING TOGETHER LET'S SAY A GREATER ALIGNMENT, THE WORKING TOWARDS A CARBON PRICE THAT CAN BE ESTABLISHED. I THINK IF YOU LOOK AT THE WAY THE WORLD'S OPERATING NOW, WE ARE GETTING MULTIPLE DIFFERENT INDICATORS OF WHAT THE PRICE OF CARBON CAN BE. YOU KNOW, THAT NEEDS TO BE HARMONIZATION, THERE NEEDS TO BE GREATER ALIGNMENT. THAT'S REALLY WHAT I'M HOPING WE CAN TAKE SOME STEPS DOWN THAT PATHWAY AND WE CAN TAKE THEM QUICKLY. FRANCINE: COMPANIES SUCH AS AIRLINES HAVE BEEN FOUND OUT TO BE GREENWASHING, CLAIMING SOME CREDITS HAVE RENDERED THEIR SERVICES CARBON NEUTRAL OR EVEN NEGATIVE. HOW DO YOU PUSH BACK AGAINST GREENWASHING? HOW DO YOU MAKE SURE THAT NO LONGER THIS HAPPENS? ANGUS: WELL, I THINK, YOU KNOW, LET'S CONSIDER THE CHALLENGE. THE ENVIRONMENTAL CHALLENGE IS HUGE. THERE'S A FINANCIAL REALITY TO IT. AND THEN THERE'S A BROADER POSITION OF ENCOURAGING CHANGE. I DON'T THINK THE WAY OF BRINGING ABOUT POSITIVE CHANGE IS TO GO ABOUT LOOKING AT OR LET'S SAY ADDRESSING ISSUES. GREENWASHING IS SOMETHING THAT I AM VERY WORRIED ABOUT BECAUSE I THINK IT ALLOWS THE NAYSAYERS TO STOP, TO NOT DO ANYTHING. WE CANNOT HAVE THAT. YES, WE DON'T WANT GREENWASHING, OF COURSE WE DON'T. WE WANT ENCOURAGEMENT, WE WANT SUPPORT, AND WE NEED POSITIVE CHANGE. YOU KNOW, SO LET'S MAKE THIS A MORE POSITIVE, HOPEFUL DISCUSSION RATHER THAN LET'S SAY GIVING GREATER JUSTIFICATION FOR NOT DOING THINGS. FRANCINE: ANGUS WHITELEY ANGUS WHITELEY THANKS SO MUCH,, A STAFFORD CAPITAL PARTNER CHIEF EXECUTIVE OFFICER. GERMANY'S BUSINESS OUTLOOK HAS IMPROVED FOR THE THIRD MONTH IN IRAN HOPES OF AN ECONOMIC RECOVERY. THE IFO INSTITUTE'S EXPECTATIONS INDEX HIT A SIX-MONTH HEIGHT. JOINING US FROM MUNICH IS CLEMENS FUEST, THE PRESIDENT OF THE IFO INSTITUTE. THANK YOU FOR GIVING US A LITTLE BIT OF YOUR DAILY SCHEDULE. HOW WORRIED ARE YOU ABOUT THE GERMAN ECONOMY RIGHT NOW GIVEN THE LATEST FIGURES? CLEMENS: WELL, I THINK WE ARE GETTING POSITIVE SIGNS FROM THE INCOMING DATA SO IT IS PROBABLY TOO EARLY TO SAY IT IS A RECOVERY BUT IT'S A STABILIZATION. THE ECONOMY IS GOING FROM CONTRACTING TO SOMETHING LIKE STAGNATING. OF COURSE, THERE IS A LOT OF UNCERTAINTY NOW CREATED BY THE BUDGET CHAOS. WE WILL HAVE TO WAIT AND SEE HOW THE GOVERNMENT HANDLES THIS. THIS IS THE BIG QUESTION MARK I WOULD SAY OVER THE RECOVERY. FRANCINE: IS GERMANY IN A RECESSION AND IF SO, WHEN WILL IT END? CLEMENS: CURRENTLY, OUR VIEW IS THAT THE GERMAN ECONOMY IS RATHER STAGNATING, OR STABILIZING, SO I WOULD NOT CALL IT A RECESSION AT THE MOMENT. WE THINK THE ECONOMY IS STAGNATING OR EVEN GROWING SLIGHTLY, BUT THERE IS OF COURSE UNCERTAINTY FOR THE NEXT YEAR. WE WERE EXPECTING A RECOVERY NEXT YEAR DRIVEN BY FILING INFLATION RATE, MAY BE FALLING INTEREST RATES, OR THE EXPECTATION THAT INTEREST RATES MAY FALL IN THE SECOND HALF OF THE YEAR, GROWING INCOMES. BUT NOW, WE HAVE THIS RISK OF THE BUDGETARY SITUATION, SO THAT CREATES UNCERTAINTY. FRANCINE: DO YOU THINK WE ARE PAST THE WORST OF THE DOWNTURN? CLEMENS: WE ARE PROBABLY PAST THE WORST OF THE DOWNTURN BECAUSE WE THINK THE ECONOMY WILL START GROWING SLOWLY. AS I SAID, THERE IS NOW THIS RENEWED RISK SO WE HAVE TO SEE HOW THIS PLAYS OUT. IF THERE WERE MASSIVE CUTS OR TAX INCREASES, THE ECONOMY WOULD BE LIKELY YES TO FALL INTO RECESSION. BUT I WOULD EXPECTED THE GERMAN GOVERNMENT TO MANAGE THIS DIFFERENTLY SO THAT CAN BE AVOIDED. FRANCINE: WHEN YOU LOOK AT THE MASS OF THE BUDGET, THE BUDGET MESS IN BERLIN, WHAT IS YOUR BASELINE IMPACT THAT HAS ON GROWTH? IF THERE IS A WORST-CASE SCENARIO ABOUT THE IMPACT, WHAT DOES THAT LOOK LIKE? CLEMENS: THE WORST CASE SCENARIO WOULD BE THAT THE BUDGET HOLE OF 35 BILLION IS FILLED BY SPENDING CUTS AND TAX INCREASES. THAT WOULD HAVE A VERY NEGATIVE IMPACT ON GROWTH. IT COULD PUT GERMANY BACK INTO RECESSION IN THE COMING YEAR. IT'S NOT MY MAIN SCENARIO. MY MAIN SCENARIO WOULD BE THAT THE GOVERNMENT MANAGES TO FIND OTHER SOLUTIONS SO THAT, YES, THERE IS UNCERTAINTY WHICH WILL DAMPEN GROWTH A LITTLE BIT, BUT I THINK WE WILL SEE GROWTH, OR RATHER WEAK GROWTH. THAT WOULD BE MY MAIN SCENARIO. FRANCINE: CAN GERMANY ACTUALLY IMPLEMENT SOME OF THE NECESSARY CHANGES TO THE ECONOMY WITHOUT THIS SPECIAL MONEY FROM OFF BUDGET FUNDS THAT WERE NOW FOUND TO BE IN VIOLATION OF THE CONSTITUTION? CLEMENS: WELL, I THINK THE GOVERNMENT COULD REVIEW THE SUBSIDIES IT HAS PLANNED, IT PLANS. IT COULD INCREASE, FOR INSTANCE, THE CO2 PRICE A LITTLE. IT'S IMPOSSIBLE IN MY VIEW TO COME UP WITH ALL THE NECESSARY FINDING THROUGH -- FUNDING THROUGH CUTS AND TAX INCREASES. THE QUESTION IS, HOW CAN THAT BE ACHIEVED? ONE WAY IS TO USE PUBLIC COMPANIES TO INCUR DEBT, THAT WOULD BE LEGAL. THE BETTER APPROACH WOULD BE TO TRY AND SET UP A NEW FUND AND ANCHOR IT IN THE CONSTITUTION. THAT WOULD REQUIRE COOPERATION WITH THE OPPOSITION, THE CONSERVATIVE PARTY. SUCH A CONSENSUS WAS FOUND FOR THE FUND FOR THE ARMED FORCES THAT WAS INTRODUCED AFTER THE RUSSIAN ATTACK ON UKRAINE AND I THINK THAT SHOULD BE REPEATED NOW FOR THE ENERGY TRANSITION AND FOR INFRASTRUCTURE. WILL THE OPPOSITION AGREE? CERTAINLY NOT IN THE SHORT-TERM BUT MAYBE AFTER NEGOTIATIONS. FRANCINE: VERY INTERESTING. THANK YOU SO MUCH FOR JOINING US, CLEMENS FUEST THERE, THE PRESIDENT OF THE IFO INSTITUTE. EXTREMELY IMPORTANT GIVEN THE LAST COUPLE OF WEEKS ON GERMANY. SLOVENIA PUTS AN EXTRA LEVY ON BANKS AND BUSINESSES TO FUND THE RECOVERY FROM LAST YEAR'S DEVASTATING FLOODS. ♪ FRANCINE: SLOVENIA'S GOVERNMENT HAS APPROVED A TAX ON BANKS AND HIGHER LEVIES ON COMPANIES TO FUND RECONSTRUCTION FOLLOWING SEVERE FLOODS IN AUGUST. AT LEAST SEVEN PEOPLE DIED IN THE COUNTRY'S WORST NATURAL DISASTER IN DECADES WHILE BUSINESSES, HOMES AND INFRASTRUCTURE WERE ALSO DESTROYED. WE ARE PLEASED TO BE JOINED BY THE SLOVENIAN FINANCE MINISTER, KLEMEN BOSTJANCIC. MR. MINISTER, THANK YOU SO MUCH FOR JOINING US. CAN YOU TALK TO US ABOUT SOME OF THESE EFFORTS TO REFORM THE GOVERNMENT THROUGH AN EXTRA TAX? WHAT DOES THAT LOOK LIKE FOR BUSINESSES? KLEMEN: SLOVENIA THIS YEAR IN AUGUST, THE BIGGEST NATURAL DISASTER IN OUR HISTORY HAPPENED. . THE CONSEQUENCES ARE SEVERE. JUST IN DIRECT COST OF THE FLOODS, THE DAMAGE WAS 3 BILLION EUROS, TOGETHER WITH THE INDIRECT COST, THIS WILL BE CLOSE TO 10 BILLION. IT IS SOMETHING TALKING ABOUT 5% OF OUR GDP TO 15% OF OUR GDP. AFTER THE FLOODS, THE GOVERNMENT REACTED IMMEDIATELY, MEANING WE ARE JUST ACTUALLY WERE IN THE MIDDLE OF PREPARING THE BUDGET FOR 2024. WE IMMEDIATELY CHANGED OUR PRIORITIES, BASICALLY FINANCING THE COST BECAME THE FIRST PRIORITY. AND OF COURSE, SO, ONE OF THE PART OF OUR WORK WAS ALSO TO TRY TO FIND CERTAIN REVENUES WHICH WILL HELP TO FUND THESE SOURCES. AFTER QUITE LONG DEBATE WITHIN THE DIFFERENT INSTITUTIONS, WE DECIDED FOR THOSE TWO TAXES, AS YOU MENTIONED. FRANCINE: MINISTER, THE TAXES WERE CRITICIZED BY A LOT OF THE PEOPLE THAT ARE BEING TAXED ON. DO YOU WORRY THAT THIS WILL HAVE A BACKLASH EFFECT, THAT ACTUALLY IT WILL HURT THE ECONOMY AS THERE IS LESS INVESTMENT IN THE COUNTRY OR BUSINESSES FEEL LIKE THEY NEED TO SPEND LESS? KLEMEN: NEW TAXES ARE ALWAYS CRITICIZED, BUT NO, THE ANSWER IS NO. BECAUSE WE TOOK A LOT OF EFFORT, MADE A LOT OF ANALYSIS, WHICH KIND OF A TAX WOULD HAVE A SMALL AS POSSIBLE EFFECT IN THIS REGARD? THAT IS WHY WE DECIDED TO FRO A TEMPORARY, ADDITIONAL THREE PERCENTAGE POINTS OF CORPORATE TAX AND TAX ON THE BANK ASSETS, WHICH ON THE OTHER HAND, JUST TO EXPLAIN, IN FIVE YEARS, WE PREDICT THE FROM THIS TAX, BANK ASSETS TAX, WE WILL HAVE LITTLE BIT LESS THAN HALF A BILLION, WHILE ONLY THE PROFITS OF THE BASE THIS YEAR IN SLOVENIA WILL BE ABOVE ONE BILLION, WHICH MOSTLY CONTRIBUTES THE DIFFERENCE BETWEEN ACTIVE AND PASSIVE INTEREST RATES. FRANCINE: THE EU IS TRYING TO PUSH THROUGH A UKRAINE AID PROGRAM. WHAT IS SLOVENIA'S POSITION ON THIS? KLEMEN: SLOVENIA HAS BEEN ONE OF THE MOST VOCAL SUPPORTERS OF UKRAINE SINCE THE BEGINNING OF THE WAR. ALSO IN THE TERMS OF FUNDS, MONETARY AND OTHER HELP TO UKRAINE, WE ARE AMONG THE TOP COUNTRIES MEASURED BY PER CAPITA OR PER GDP IN THE HELP OF UKRAINE. AND WE INTEND TO SUPPORT UKRAINE IN THE FUTURE. REGARDING NEW FINANCIAL INSTRUMENTS THAT EUROPEAN COMMISSION IS INTRODUCING NOW, WE SUPPORT IT, WE BELIEVE IT'S NECESSARY BECAUSE IT IS AN INSTRUMENT WHICH WILL SOMEHOW GIVE AN ANSWER TO A CHANGING SHORT-TERM RECOVERY NEEDS AND MIDTERM MODERNIZATION NEEDS OF UKRAINE, WHY ON THE OTHER HAND, WISHES VERY IMPORTANT, WHICH THIS INSTRUMENT WILL BRING ADDITIONAL TRANSPARENCY AND PREDICTABILITY REGARDING THE FUNDS NEEDED. FRANCINE: MINISTER, WOULD YOU BE SUPPORTING AN ALTERNATIVE AID PROGRAM IF HUNGARY VETOES A PROGRAM FOR 50 BILLION? KLEMEN: YES. ? 100% -- FRANCINE: 100%? KLEMEN: FROM WHAT IS KNOWN BY NOW, THIS IS QUITE IN LINE WITH OUR VIEWS AND THE WAY HOW UKRAINE SHOULD BE HELPED. FRANCINE: MINISTER, HOW MUCH DO YOU WORRY ABOUT FISCAL DISCIPLINE AND GROWING DEBT IN SOME OF THE LARGEST COUNTRIES IN THE EU? KLEMEN: NOT VERY MUCH. AFTER FOUR YEARS OF ESCAPE CKAUSE, WHICH MEANS THE FISCAL RULES WERE PUT ON HOLD AFTER THE PANDEMIC, AND ENERGY CRISIS, OF COURSE, A LOT OF MONEY DISTRIBUTED IN EUROPE, THE GOVERNMENTS, THE MINISTRIES, THE PEOPLE GOT USED TO IT. IT'S DIFFICULT TO CHANGE IT BACK TO THE SITUATION WE WERE BEFORE 2020. BUT IT IS, SO IT IS CLEAR THAT IT IS THE END OF THIS ESCAPE CLAUSE, SO THE NEW FISCAL RULES SHOULD BE BACK IN THE CASE OF OUR COUNTRY, WE HAVE WRITTEN THE FISCAL RULES IN OUR CONSTITUTION. BUT OF COURSE, THESE ARE THE OLD FISCAL RULES WHICH DON'T ANSWER TO THE CURRENT SITUATION ANYMORE. FRANCINE: MINISTER WHAT ARE, SOME OF AND WHICH PROPOSAL DO YOU THINK HAS THE BEST CHANCE OF BEING AGREED ON? KLEMEN: CURRENTLY, WE ARE TALKING REGARDING FIRST SPECIAL DEFICIT SAFEGUARD, WHICH WILL SOMEHOW REQUIRE FROM THE MEMBER STATES TO BRING THE DEFICITS WELL BELOW 3% THRESHOLD. THE SECOND ONE IS THE DEBT REDUCTION SAFEGUARD, WHICH HAS BEEN KIND OF WRITTEN IN ANY WAY. THE THIRD THING, WHICH IS VERY IMPORTANT,, IS REGARDING THE DEBT SUSTAINABILITY ANALYSIS, WHICH IS PROBABLY A NEW WORKING TEAM WILL BE FORMULATED TO ADDITIONALLY ANALYZE THIS PROCEDURE WHICH IS IN SIMPLE TERMS A COMPLEX SYSTEM WHICH GIVES THE RESULTS VERY DIFFERENT FROM ONE COUNTRY TO ANOTHER WHAT SHOULD THE GOALS OF THE COUNTRIES BE. FOURTHLY, MOST PROBABLY THE DEFENSE EXPENDITURES WILL HAVE A SPECIAL STATUS REGARDING A POTENTIAL OPENING OF EXCESSIVE DEFICIT PROCEDURES. THESE ARE THE BASIC QUESTIONS. FRANCINE: DO YOU THINK THERE IS ENOUGH AGREEMENT TO ACTUALLY FIND A CONSENSUS AND SIGN OFF? KLEMEN: FIRST OF ALL, I AM QUITE SAD THAT A LOT OF VALUABLE TIME WAS WASTED DURING LAST YEARS AND MONTHS. I WAS VERY VOCAL LAST YEAR AT THE MEETINGS REGARDING THIS. ON THE OTHER HAND, THE SPANISH PRESIDENT, ESPECIALLY MINISTER, IS REALLY TRYING TO FIND A CONSENSUS SO I REALLY APPRECIATE ALL THE EFFORTS THEY ARE DOING. OF COURSE, THERE ARE BIG DIFFERENCES IN THE VIEWS OF THE COUNTRIES, BUT ON THE OTHER HAND, ALL THE MINISTERS OF FINANCE AGREED THAT WE HAVE TO FIND A COMPROMISE TO A SUSTAINABLE FINANCE IN EUROPE. ALTHOUGH IT STILL SEEMS DIFFICULT, I HAVE NO DOUBT THAT THERE WILL BE A COMPROMISE IN THE NEXT FEW WEEKS OR MONTHS. FRANCINE: WE WERE TALKING ABOUT THE FLOODS AND THAT MEANS THAT BECAUSE OF YOUR BUDGET, YOU ARE NOT IN LINE WITH THE FISCAL RULES AND YOU HAVE BEEN GRANTED AN EXTENSION. ARE YOU CONFIDENT THAT YOU WILL NEED TO THAT EXTENSION OR DO YOU WORRY THAT SOME OF THE RECONSTRUCTION PLANS WILL COST MORE THAN EXPECTED? KLEMEN: LIKE I SAID, THE PRIORITIES OF THE GOVERNMENT OF COURSE SHIFTED BECAUSE OF THE FLOODS. OUR GOAL, AND WE HAVE BEEN VERY CLEAR ABOUT IT, OUR GOAL IS TO TRY TO RECONSTRUCT ALL THE AREAS AS SOON AS POSSIBLE. WE DON'T WANT TO GO INTO A POSITION WHERE THE RESTRUCTURING WILL TAKE 30 YEARS, WHICH WAS THE CASE IN A LOT OF NATURAL DISASTERS. ON THE OTHER HAND, THE DISCUSSIONS WITH THE COMMISSION REGARDING THE SO-CALLED ONE OF EFFECTS OF THESE FLOODS WERE SUCCESSFUL UNTIL NOW. JUST THIS WEEK, A COUPLE OF DAYS AGO, THE COMMISSION INTRODUCED THEIR STATEMENT ON THE BUDGETARY PLANS OF MEMBER STATES AND SLOVENIA IS AMONG SEVEN COUNTRIES WHERE THE COMMISSION AGREES THAT OUR BUDGET FOR 2024 IS IN LINE WITH THE RECOMMENDATIONS OF THE COMMISSION. FRANCINE: YOU ALSO PLANNED I THINK TO ISSUE SOME BONDS IN CHINA AND JAPAN. AND I THINK IT WAS MEANT TO BE IN THE AUTUMN. WE HAVE NOT HAD THAT YET. IS IT POSTPONED OR CANCELED? KLEMEN: NO, I BELIEVE THAT OUR TREASURE IS THE BEST CENTRAL MINISTER IN EUROPE. THE QUESTION OF ISSUING A BOND IN JAPAN IS STILL VERY ALIVE, MOST PROBABLY WE WILL ISSUE IT NEXT YEAR. THE REASON WHY WE HAVE NOT DONE IT THIS YEAR WAS AS WE THOUGHT A YEAR AGO IS BASICALLY MOSTLY BECAUSE OF A VERY GOOD LIQUIDITY AND CASH POSITION WE HAVE TODAY. THE SECONDLY, WE TRIED TO BRING THE DEFICIT AT THE END OF THE YEAR BELOW THE 70% OF GDP. FRANCINE: AND THE ONE IN CHINA? KLEMEN: THAT'S WHY WE DECIDED TO MOVE IT TO NEXT YEAR. WE HAVE NOT DECIDED REGARDING CHINA BUT WE ARE EXPLORING THIS MARKET AS WELL. ALL OF THIS IS JUST WE WANT TO EXPLORE ALL THE POSSIBILITIES AND TO BE PREPARED IF ANY OTHER NEW FINANCIAL CRISIS ARISES. AND I THINK THAT IS WHY IT IS IMPORTANT TO DISTRIBUTE THE RISKS. FRANCINE: THANK YOU SO MUCH FOR JOINING US TODAY. THAT WAS THE SLOVENIAN FINANCE MINISTER, KLEMEN BOSTJANCIC, JOINING US HERE IN THE STUDIO. COMING UP, RETAILERS GET READY FOR BLACK FRIDAY WITH THE BIG DISCOUNTS. WILL CONSUMERS SPEND BIG OR STAY-AT-HOME? WE HAVE ALL OF THE DEALS AND THE TRENDS AND THE DETAILS, NEXT. THIS IS BLOOMBERG. ♪ FRANCINE: IT IS BLACK FRIDAY ON WHAT RETAILERS HOPE WILL BE A BIG SHOPPING DAY. CONSUMER CONFIDENCE IN THE U.K. REBOUNDED IN NOVEMBER. LET'S GET MORE FROM BLOOMBERG OPINION'S ANDREA. SO GOOD TO SEE YOU. HOW IMPORTANT IS BLACK FRIDAY TO RETAILERS THIS YEAR? > > IT'S GOING TO BE VERY IMPORTANT. IT IS ALWAYS IMPORTANT. I THINK IT IS GOING TO BE VERY MIXED. PWC ACTUALLY THINKS SPENDING WILL BE DOWN THIS YEAR IN THE U.K. 5.6 BILLION POUNDS COMPARED TO 7.1 BILLION LAST YEAR. I THINK CONSUMERS WILL SHOP BUT I THINK THEY MAY SHOP IN A DIFFERENT WAY. OTHER SURVEYS HAVE FOUND THAT CONSUMERS WILL SHOP ABOUT THEY ARE GOING TO LOOK FOR GIFTS, THEY ARE GOING TO LOOK FOR ESSENTIALS, THEY ARE REALLY GOING TO STOCK UP TO DO THEIR CHRISTMAS SHOPPING OR MAY BE THINGS THEY WOULD HAVE BOUGHT ANYWAY FOR A CHEAPER PRICE. FRANCINE: WHAT ARE WE EXPECTING FROM ONLINE SALES? THESE FEEL WIDER AND DEEPER THAN USUAL. > > ONLINE HAS SUFFERED SO YOU MAY SEE MORE ONLINE DEALS. I THINK THE DEALS GENERALLY, AT THIS TIME LAST YEAR, EVERYBODY, THE U.K., EUROPE, U.S. HAD THIS MOUNTAIN OF INVENTORY THAT THEY WERE TRYING TO WORK THROUGH. I THINK THAT HAS BEEN LARGELY WORKED THROUGH BUT THERE ARE POCKETS OF PROBABLY OVER SUPPLIES. IF YOU ARE IN THE MARKET FOR A COACH OR BOOTS, THAT'S PRETTY GOOD. FASHION WILL BE VERY MIXED. . THERE'S AN AWFUL LOT OF SEQUINS AROUND, I AM NOT SURE PEOPLE WILL BUY THAT MANY SEQUINS. ELECTRONICS AS WELL, WE COULD SEE SOME DEALS. FRANCINE: THANK YOU SO MUCH. ANDREA FAUST HAD FROM BLOOMBERG OPINION. CHECK OUT EVERYTHING SHE WRITES. ALWAYS INTERESTING AND A LITTLE BIT DIFFERENT, TOO. THIS IS A PICTURE ACROSS THE BOARD. LOOK AT MARKETS, A LOT OF THE FOCUS IS NOT ONLY ON INFLATION BUT IT IS ON THE GERMAN ECONOMY. WE HAD A GREAT CONVERSATION WITH CLEMENS FUEST OF IFO. EUROPEAN SHARES WAVERING AFTER THE LATEST ECONOMIC DATA HIGHLIGHTED IN GERMANY IS STRUGGLING TO RECOVER FROM AN ENERGY INDUSTRY DOWNTURN LAST WINTER AND THE IMPACT OF HIGHER BORROWING COSTS. WE WILL HAVE PLENTY MORE ON MARKETS, NEXT. THIS IS BLOOMBERG.