>> tensions rise as kiev wanches moscow to keep their roops in the premiere bases. merkel meets the queen. david cameron is likely to be disappointed. the german chancellor is expected to call for a stronger e.u. as she kicks off her e.u. rip. the crowe, ross mcunion utlines plans to shrink r.b.s.

good morning, everybody. welcome. you're watching "the pulse" live from bloomberg's european headquarters here in london. i'm guy johnson. francine lacqua is off today. she will be back soon. what else have we got coming up for you? well, the brick is back. we're live with lego's c.e.o. look at the amazing turnaround. cybersecurity heads underground. 're going to go inside a mountain larry. -- lair. let's get to our main story first of all. tensions rising in the ukraine. kiev is telling moscow to back off. ryan chilcote is following the latest developments from inside ukraine's parliament. talk to me about the latest developments. tensions riseing with moscow.

>> oddly enough, the most recent and troubling development has to do not with this parliament but the local parliament in crew yain's crimia. a group of about 60 armed men seized the building at about 5:00 a.m. local time. acting president just took that job on friday when the ousted president fled. what these men want that seized this building, they were in camouflage armed with weapons. it is not clear. they took down the ukrainian flag and put up a russian flag instead. are the russians involved? they are not saying that they are. meanwhile we have a mill exercise underway on the western border. russia's western border, which of course is shared with ukraine and the defense minister just a few minutes ago said there are russian fighter

jets involved in that. is that a show of muscle or a preplanned exercise? all of this has the united states, nato very concerned. talking about the need for yause to stay out of ukraine d not by -- do not get militarily involved in any way. the situation in crimia, mainly a russian-speaking group of people. when viktor yanukovych was in power, they were talking about the western regions. now that the opposition is in power, the concern is they could get sort of lose out if you will in this carefully -- ethnic mix within the ukraine. nteresting developments today. the regional parliament

building in crimia. >> tell us what is going on in the building. we're waiting to see this new government formed. this new leader step forward. an interim government but an important one given the financial situation. >> i'll tell you exactly what's happening. i'm inside the parliament. right in front of me is the man that the opposition said they want to be prime minister. surrounded by 50-60 journalists that want to talk to him. they see man that is about to take the helm to lead the country for three months as they prepare for elections. he will be the guy that is the point man for negotiating that very badly needed aid with the i.m.f. , the e.u., the u.s. also he is the guy that obvious sli going to have to try and make sure that at least the territorial integrity of the country is kept together. everybody wants to talk to him.

he is walking in front of me now into the parliament where we are expecting this vote ometime today. he has been in the minister of finance, been in the central bank. they see kind of guy to cut a deal and keep things not guilty that sense. his political experience is one reason why he is actually not that popular with some of the demonstrators even though he was a leader of the opposition. they would like to see new blood. nobody who had anything to do with the previous government. that's who they would like to see in power. >> thank you very much kind to. -- indeed. angela america sl in the united kingdom today. hans nichols joins us now berlin with details. what are we expecting today from ms. chancellor? >> she is going to call for a more closely integrated

european union. she wants to strengthen it. any changes to the treaty have to have that as their north star. a stronger more connected e.u.. she will also be a addressing the british public and wans to make the case why being in the e.u. is good for the british economy. just how strongly she calls for changes and how much we -- she gives to cameron for making changes, potentially for a treaty, may be where she is a little bit disappointed. she will be meeting with ed miliband also. >> the highlight of the tour from her point of view. let's talk about this treaty issue. to a certain extent, there is a bond that exists between london and berlin at the moment. there is a sense maybe that they can see eye to eye on a number of issues. reopening treaties and her finance minister has talked about this in the past.

could be problematic. it would be easier to work with an existing treaty. >> that's what it comes down to. can you refine these treaty arrangements without having an entire renegotiation. cameron clearly wants to have more protection. this is the case he needs make in his own party. my view of what merkel is going to say, it is going to be difficult for her to satisfy glemp the u.k., particularly in cameron's party. >> she doesn't know exactly whether or not david cameron is going to be in power when we get around to this referendum. hans nichols, our international correspondent. r.b.s. has posted its biggest loss since 2008. the bank received win of the biggest bailouts in history. we have more on the numbers and they don't make great reading. >> no, they don't. pretax operating loss of 8.2

billion pounds. consensus, 6.7. bigger loss than expected. some big write-downs. we knew this was coming. we know they are going to cut costs by 5 billion pounds. they are going to shrink the securities unit as well. this is a lot of stuff we already knew, guy. on the subject of job losses, they are going to combine 7 divisions into three. we're not going to get a number for job losses. we lack detalse tail there. the other side of things we know they need to raise capital. how are they going to it? raised over a billion pounds. what is going to happen with the u.s. banking unit? a lot of people asking the question, they need to raise more capital. will the process be accelerated? >> is it going to be enough? you have to look at whether or not the current structure of capital raising is going to be

enough. whether more money is going to be applied. they keep losing money at this rate. >> >> more restructuring costs to come. the costs are mounting. how much more litigation costs do that they have to put aside? >> the bonus pool. it is down from the year before. in banking terms. this is not a big bonus pool, but when you're a bank 81% owned by the government and you have had losses for the last six years and you a bonus pool of 576 pounds. everybody is going question it. it is hard to justify. can you look at the two numbers, the loss and the bonus pool. what are you going to? not pay them? lose them? lose talent? that is something that ross mcewan talked about. around 73% which is punchy.

the bonus pool, believe you and me, that will be the headlines for a lot of the newspapers today. we'll don't conversation. we have guests lined up to take us through the credit angle on r.b.s.. that is coming up later on. shares are climbing for the world's biggest publicly traded hedge fund. here with more is our european business correspondent, caroline hyde. >> a smile on the face of the c.e.o.. it seems the restructuring plan is starting to bear fruit. let's go through the positives. assets, they climbed in the fourth quarter. a surprise buyback of shares. 115 million worth. that was more than had been expected for many. they are also cutting costs faster than many expected. $270 million by the end of next year and they posted a profit.

investment gaining particularly for the g.l.g. unit. client redemptions are slowing, but a long way to go. we have to remember that for man group. assets are still off by 20% since 2010. jpmorgan are saying there are still better stocks to pick out there. it is not quite turning around. their biggest hedge fund, it has lost money and assets for three straight years. it has still lost money this year. a cautious outlook for man group. we are starting to see a turnaround. analysts are starting to get more excited about the stock. back to you. >> caroline, thank you very much indeed. caroline hyde. still to come, building the

brand brick by brick. our europe editor david tweed is inside lego to find out how it became one of the world's most successful toy companies. david? >> you know wouvent more important things about the lego brick? it is to be able to take it apart like that so that you can rebuild it. i'll be back after the break ithlogue's earnings and at 9:00:15, we'll have an interview with the c.e.o. ♪

>> good morning, everybody. welcome back. you're watching "the pulse". angela america sl in the u.k. today and set to speak in london in parliament a little it later on. it may not be what cameron wanted to hear. america sl expected to call for a stronger, deeper e.u. which conflicts with what david cameron is promising. offering a referendum to the british people in the next few years. 2 chairman to have pro e.u. amnesty group, the european ovement. howard, let me start with you first. the german chancellor is coming. david cameron has often seemed

shares his merkel views. we need change. we need to make sure the e.u. functions better. do you think that is what we're going to really hear today? >> first of all, merkel has a new coalition government in germany. so she is more constraint by the fact that she has got democrat partners. i think she is limited in what she can say. i think she is limited on what she can deliver to the extent we get changes in the future. they will be minor and not major and not sutcht to the asht that u.k. would prosper better outside than inside. >> we're in a situation where particularly the u.k., it feels like a binary argument. it seems the argument is more subtle. there should be a debate about

the middle ground. how real sisk it that we don't have to go all the way to the -- realistic is it that we don't have to go all the way to extreme and that we can generate a situation which is acceptable to all? >> the european union is the -- 50% of foreign investment. 40% of our exports -- it depends onmy. -- membership. the fact of the matter is we should all work together to make the european union work even better. germany and the u.k. have a similar agenda on creating a more -- european union. if mr. cameron wants to discuss in those terms. if he talks about repatriating powers, negotiating treaties, just one member state, i don't think he will get anything. >> howard, the e.u. could do less but do it better. that is a line that came out of a briefing that i read this

morning. that sounds like a good idea. do we need to leave the e.u. to get a better outcome? >> is it possible that we can negotiate a better outcome from within. it seems the risks we're taking in going to that extreme is quite significant. >> well, i think risk is a word that comes up in order to promote people's fierce. if you look at some of the most prosperous countries in the world, highest g.d.p. per capita, high eths wealth per capita, like switzerland, norway, countries like australia. emerging countries like israel. singapore. they are prospering because they have flexibility and they can pursue economic policies, which are in their country's interest in order to promote growth and jobs. do we want to be associated with a europe which has a country like spain, with 50% youth unemployment? is that the way we want to go?

is that the position of the fufe future or do we want to focus on our great universities, our great financial industry, services industry. >> all of which is deputyly embedded into the -- deeply embedded into the e.u. there are problems. they are well recognized. e need reform. reform seem it is like a much easier and more pragmatic route than taking the extreme choice, which is to simply leave and wash our hands of the situation. >> it is so embeded in the culture over the e.e.u. i'll give you a tangible real life example in my own business. i'm a beneficiary. we own a housing estate in berlin. we recently received an e.u. grant to upgrade that estate. we're trying to do our best with the grant to improve the

facilities for the children, the playgrounds, etc., etc. why would taxpayers be paying money to the e.u. for that money to then go back to berlin? would it not be better that the local authority could distribute the money? it is so embedded. it is so cultural within europe. there are so many bureaucrats. people are lig off this system. you're asking them, it is a difficult challenge. >> i think there is confusion this year. it is worth remembering that the investment of the european union is making all around europe, generating growth for all around europe. if structural funds are spent in romania, you're creating jobs there, giving people money. by -- you create growth all over the european union. >> let's talk about reform,

though. that seems to be at the heart of what the u.k. ultimately wants. it wants the europe that is more efficient. there are inefficiencies in the way those funds are distributed. there are inefficiencies the way that brussels operates. how do we make brussels and europe work better? if we can achieve that then some of the things a that howard is talking about may disappear. >> it is worth remembering that -- the way this company works. >> there is democratic control over those institutions in a way that maybe there isn't in brussels. >> it has been a -- the growth, reforms that maybe make it more democratic and more representative. the european parliament has more powers now form the -- you and me, here around europe. i agree with you, you have to make them all more accountable. including the council of ministers that brings together the elected members to their

member states. they should be more transparent an open about what they are doing. the commission should have its president directly elected. e have a new system now. making the direct link between the -- on the ground and the person who is administering -- >> just very briefly. if they reform brussels, would you be happy or are you always going to believe you have to get out? there is no middle ground? >> i would have signed up in 196757 when we had r--- 1975 when we had a referendum to the free trade agreement. i'm not looking for a large bureaucracy in brussels to regulate our industries, our courts, etc. etc. >> gentlemen, we're going have to leave transit. thank you very much indeed. we'll take a short break and be

back in a couple of minutes. ♪

>> welcome back. time for today's hot shots. there is no rest for the winter olympians who went from sochi to sweden. after two rounds, germany led the large hill individual event. nice jump. and day one over the fracture

cycling world championships in colombia was dominated by australian bikers. they had a stunning lead in the men's individual trice win the gold medal. -- race to win the gold medal. >> let's check out the equity markets for you. 19 minutes into the session in europe. further back from the stoxx 600. ftse down. cac 40 down by 1/3. italy and spain showing losses as well. that is the focus for you. the senate banking committee -- happens at 3:00 p.m. u.k. time. check out the euro. uickly for you, euro/dollar. 1.6161. check out the regional numbers in germany. it is not just restricted to likes of spain and italy. you have regional inflation around 1% in those countries.

what is the e.c.b. doing? that is the big focus for next week. >> jon, thank you very much indeed. we are going to take a break. we'll be back in a couple of minutes and talk about lego and that number there. ♪

>> good morning, everybody. welcome back. you're watching "the pulse" live from bloomberg's european headquarters here in london. i'm guy johnson. my colleague, francine lacqua is off today. these are the bloomberg top headlines. angela merkel is in london today. she will address both houses of parliament and have tea with the queen. she is expected to call for a stronger european union during her visit. she will also try and convince the u.k. to stay in europe. >> we need to be market and

england is part of that market. we need to deepen -- need to have a -- to move forward. if some countries don't want to move forward, they have to have their own way. > has won support of the kiev. an protesters in secretary of state john kerry says the u.s. is formulating a loan guarantee to the country. kerry also warned against any russian intervention. and investors are punishing r.b.s. it has posted its biggest loss since getting a government bailout in 2008. they have plans to shrink their government investing business and overseas operations. now lego's results have come out. david tweeth tweed is at the

company's h.q. in denmark. good to see you. >> guy, they have just been handed to me, these results. what we see is once again lego is powering ahead with an increase in sales of 11%. i'm going to give it to you in u.s. dollars to about $4.5 u.s. dollars. a little bit of a showdown from last year 25rks% increase in sales but extremely respectable when you consider that the global toy market has been either slightly declining or has been flat in some markets. they have increased sales in all markets and what they are aiming to do and continuing to say they can do is continue to make market share. let me give you the net profit, up 9% to $1.1 billion. these are pretty good results. they are very pleased here at lego. you can see they have been smiling all morning. let me talk to you a little bit

about how they have managed to do this incredible turnaround. one of the keys is getting closer to the consumer and one of those consumers is what they call the adult fan s oflogue. the so-called -- we're going meet a few of them now. >> in denmark's capital, copenhagen, 10,000 people under one roof. it is not a muskse concert. it is not a football -- it is not a music concert or a football match. it is a lego event. e grownups showing off their creations are adult fans of lego. it is fans like this that are inspiring lego designers. >> it is a round tile with a ole in the middle. the motor can run more freely. >> it hasn't always been like this.

logue has been protective of its packaged toy sets. the lego brand ideas didn't come easily. >> they welcome this with open arms. so much actually that they -- community, a special community for -- >> martin and his mates traveled from the nether land. some of the bricks can be programmed to -- operate the motors powering this conveyor belt understanding the technology of the brick is as important for these fans as playing with it. >> what we do here, some fans, we call it rebirth engineering. we look at what lego did. by the way, how did that do that? you look at some other brands, they are very close. they don't want you to look at what is inside. lego actually opened up. here is all the instructions. here is how we built it. >> lego isn't just -- it has

started employeing them. his creations impressed so much that lego gave him a job. >> we started traveling the world. doing conventions. we have done blimps and forklifts. how big you can think with lego. there is no limitation. you can do whatever you want if you have the imagination and the patience. >> perhaps the biggest problem lego faces with its fans is it just can't hire them all. >> guy, getting closer to the consumer, getting closer to the market was one of the key changes that was made by the new chief executive officer 10 years ago. one of the results of that is this lego -- this has been out two years. it is lego directed completely towards the girl part of the market, but the girls, they found out, they want to built.

i'm going to be back in about 3/4 of an hour with an interview with the c.e.o. >> i'm fascinated. all been a lego fan. always will. david tweed, thank you very much indeed. he will be back with the head of that company. cybersecurity is heading underground. our international correspondent hans nichols visited a swiss mountain lair where one company is looking to separate your digital i.d. from the data that so many companies delect on you. >> your -- collect on you. >> your smart phone know where is you sleep and shop. a swiss company wants to help you establish a zone of privacy. >> your data is the currency for them to give you a service where you can still control your identity. you can let facebook know what you do. but not necessarily who you

are. >> they want to secure your electronic passport, a digital master key behind these nuclear glass walls in the swiss alps. security is a mix of ancient and modern. badges and fingerprints followed by tunnels. poured into a mountain. even the air inside this bunker is secure. that is giant shaft. it fans out into two lateral spans. it is one way they want to convince you that your personal i.d. will be secure inside this swiss mountain. >> the bunker was designed for the swiss high demooned live for month -- command to live for months in the case of war. >> this is the analog defense system. we are now talking about the digital defense system. >> perhaps the greatest

protection is swiss neutrality and its data protection laws. out of reach of the n.s.a.. >> has snowden been good for business? >> yes. snowden created the reference that people will not trust anymore what normally they were obviously trusting, which was government. >> swiss banks were once famed under their secrecy but tax cases have threat tight end industry. could storage be an alternative? >> this is the future of the country. to store data, the next currency. >> considering an i.p.o. on the nasdaq with plans to build bunkers like this one all across switzerland. >> you will update and upgrade to your personal cloud here in this mountain. >> will the echoes compromise the data? >> no. >> but it won't leave the mountain. >> hans joins us now.

hans, i have to say, you go around switzerland and there are lots of these bunkers there, the mountains just riddled with them if you're a swiss national, you spend a bit of time in the army, you spend a bit of time in them. how big can this get? >> this one was three stories. there are 60,000 bunkers that can be converted. maybe about 200-300 meters deep. room after room. it was hard to get a real good sense. they would not give us a map. i asked for one. we were just walking around. they are giant caverps full of mountain water, pools. room after room. the important thing is what they were talking about, given what happened on capitol hill yesterday with brady dougan getting grilled, the swiss always want a backup plan and the backup flan in the banks go bust, you have heard more talk about is this, take that same penchant for secrecy and translate that to data and the

digital age and this could be the future of switzerland, storing data out of reach of the n.s.a. there is nothing that the n.s.a. can do to force switzerland to give over data. >> i guess some of the nordics will like a slice of that pie as well. you can see the business model. it doesn't seem that difficult to pursue it. people want privacy. they want to make sure their data is secure. that is going to get bigger and bigger as more data is collected. it seems like a logical way to go. >> they are shrinking it. what you used to need an entire cavern for you can now dow in a briefcase. they bought the bunker from the swiss army in twen. they want to offer individual rooms to individual companies. a company has their own room. it is totally secure. they basically own it. guy? >> that is a great story. fascinating story.

switzerland. i guess, yeah, things are changing. thank you very much indeed. great package. hans nichols, our international correspondent. now the fed chair janet yellen will testify today. speculation is she will continue to scale back stimulus. joining us to zhuss, the chief economist at markets.com. do you think the data that has happened between -- what is meant to happen, will change the view of the world? >> had we had this conversation yesterday morning, i would have said no. but as we saw yesterday with the housing data and five-year high, maybe we're starting to see a thaw in the polar vortex. this is a postponement because of the weather. this is a preformatted speech. we know what she is going to say. my feeling is i think the u.s. economy went through a blip. we should see a drop another .01 in the unemployment rate.

i do feel this may be a blip and it is not a major weather deterrent. >> ok. the e.c.b. i'm just watching the drop. the first time since 2006. that is going to be great news for draghi. how does he dealing with the situation where even germany is beginning to post pretty poor c.p.i. data. that should be the only -- >> yeah. my feel is the first of january, i was expecting a rate cut next week. ok? 10-15 basis points. i'm still expecting a rate cut even if we go into a negative deposit rate. as you said, inflation is going nowhere but down. last week's p.m.i. data. i'm more concerned about the manufacturing.

i know the euro now is off the 137 level. remember back in october of last year, 1.3733. what happened in november? we got a rate cut by the european central bank. i feel we will get a rate cut by the european central bank. 12:45 next thursday to 1:04 next friday. could this be a 24-hour period that truly dictates a major move in the global markets for the rest of this year? >> bill, on that note, we'll leave it. our chief economist at markets.com. now coming up, investors punishing r.b.s. this morning. we'll dig deeper into the company's overhaul plans. the c.e.o. ross mcyou san speaking now. what next for this business? we'll discuss that in a moment. ♪

>> good morning, everybody. welcome back. you're watching "the pulse" live from bloomberg's london headquarters. r.b.s. posting its biggest loss since the bailout in 2008. the c.e.o. is speaking now about the strategic review. joining us now is the managing director in europe. good morning. i'm struggling to see the case surrounding r.b.s.

mcewan is saying the bad news is going to continue. he is trying to reform an institution that is massive and unwielding. it is going to take an awfully long time. i'm not is that your the end as a result something you necessarily want to buy into either. >> i think that is probably summing up the reason why the shares have dropped so much this morning. it is kind of lacking a kind of a spark. it is lacking a bit of a vision, if you like, that is exciting for investors and i guess the question now is more well, with an emerging, solid, steady lower risk, the u.k. retail bank, effectively. at what point is it cheap enough basically that you buy effectively sort of a steady -- >> how do you value that? what would be the right metrix to look at, a boring, dull, utility bank that operates out ott u.k.. what are the nearest comparisons?

>> well, sloids a very close comparison -- lloyds is a very close comparison in that respect. they are much further along in the process. already starting with significant dividend payout stream. r.b.s., given what they presented today, maybe a bit further behind lloyds in that process and people had hoped for before today's news and therefore the big discount. again, lloyds, on the other hand, the evaluation quite rich really if you look at it. investors seem to price this sort of solid dividend story quite highly. maybe over time, that is what r.b.s. could sort of aim for prsmr how do i price political risk? how do i think about that? another set of numbers that are pretty disappointing, a big bonus pool, the income ratio

that is still stratospheric compared to the targets where mcewan wants to be. how do i, if i have r.b.s. shares, think about that risk. at some point, once again, the politicians are going to get involved. >> yeah, i think it is probably part of the valuation and part of the story. as we said, you know, it seems like management is almost sort of beholden to this sort of slightly political story of oh, we'll pull back from everything outside of the u.k. somehow, bad and evil and risky and whatever and we only want to be in the u.k. and the broader u.k. economy, if you like. you know, given that involves a lot of shrinkage now and once it is achieved, there is sort of the lack of any kind of growth story, a lack of a spark if, you like in that respect and i think that is to a good extent related to the political situation.

>> just very briefly, the capital situation, they are showing a lot of assets. it doesn't look as -- as you may think. there are things you don't know about. also whether or not actually given all of this, there isn't maybe a need for more capital potentially further down the road? >> yes. again, i think that is weighing on the evaluations this morning a bit. it is correct. lloyds -- r.b.s. has outlined a whole number of asset sales. citizens probably being the most important and biggest one. yet basically what they are telling us is in three years, we will have basically the same am of capitaled a we have today. essentially all the money they are raising from sales and maybe eventually from profits goes somewhere else. given that dividend also probably be -- remain quite low, you to wonder is it

litigation, further restructuring costs? all the things that don't raise evaluations. >> ok. we'll leave it there. thank you very much indeed. as we head into break, you're as the at live pictures captain of the capsized slip is going aboard for the first time since 2012. we'll see you in a moment.

>> welcome back. it is a global first for renewables. the first power company lists on the london stock exchange has already raised 12 million for investors. there is more good news. it is also in the mix as well. the c.e.o. joins us. great news. >> the european commission has elected to award a grant to the company this week. yesterday the minister in scotland announced a further investment. >> right. in to tality, you have how much money and how are you going to invest it? >> as of last week, with we pulled together 20 million in sterling in funding. we will commence construction on the largest tidal project. >> the potential for that is? >> the potential is recently reported as capable of supplying half of scotland's

energy requirements. >> that is a base load. this is consistent. >> it is very consistent. it is what we call firm. it is very prirktable. -- predictable. we are almost 100% predictable. >> out of curiosity, this money, a from scotland and b, more importantly from the e.u., this is a long project. what happens to that money? >> it is certainly safe. regardless if there is a decision on independence. >> just give us a sense of the timeline. how long does it take? ? you started construction. how long does it take to get it built and put into place? >> we'll start construction next month. throughout the rest of next year, we'll be in position to complete the onshore works and then we'll have our first turbines underwater, like windmills. we'll continue that buildout up until 2018.

we'll get 400 megawatts or 2,000 homes with power installed. >> we have projects around the world. we'll be moving to china, india, canada and potentially france now as well. >> in terms of the ability, once the ball starts rolling, you start getting money in. the scale of the company is you can keep going back to the market for more money. >> it is a very exciting period for us now. obviously the market is validated. if you have good projects, there is an investor interest. we can tap the market every time we have a new project which makes good sense. we expect to see that over and over again over the next five to 10 years. >> thank you for joining us. e are going to take a break. what have we got for you?

well, the brick is back. we'll speak with lego's c.e.o. from denmark. and tensions are rising in the ukraine. ryan chilcote reports on the latest. ♪

>> tensions mount in the ukraine. lawmakers get ready to approve a new prime minister. merkel meets the queen. david cameron is likely to be disappointed. rbs.tors are punishing the bank sees its biggest loss since the 2000 a bailout -- 2008 bailout.

good morning to our viewers in europe. it warm welcome to those waking up in the united states. francine is off today. this is "the pulse." we are going to go live to lego's ceo. private security heads underground. when business is looking to separate your digital id -- one business is looking to separate your digital id. hans nichols joins us from berlin. what are we expecting to hear from the chancellor? expect angulo merkel --

agela merkel to call for stronger, more closely knit european union. that thadifferent is n david cameron's vision of the european union? she has multiple audiences. she wants to convince the british public that staying in the european union is beneficial economically. in herre eurosceptics own party as well. she has tea with the queen after her speech. she is meeting with opposition leaders. in some ways, she manned up disappointing cameron and the

opposition leaders. >> that may be the outcome. we don't know what is going to happen. this isenter of all of the treaty. the british, the tory party, the incumbents would like to repatriate powers. hinted that she can see a way of altering parts of lisbon, but not completely rewriting it. cameron is suggesting a rewrite of the fundamental relationship within the treaty. there will be a great speech. they will try to glide over some of the differences. at the end of the day, there are differences here. cameron wants more flexibility.

merkel wants greater collaboration. everyone wants there are exceptions and everyone wants to be together. you just have to find the balance. >> thank you very much, indeed. let's go to ukraine. lawmakers are set to approve a new prime minister in the interim cabinet. to the south, ukrainian forces have started to make a move and we are watching the situation develop. we have seen kiev summoning the russian envoy. all of this happening within the last few hours. kiev -- the latest. >> they are still meeting inside the ukrainian parliament.

i just spoke with a man who is expected to be voted in as the next prime minister. it is something of a foregone conclusion. yesterday, the leaders of the opposition took their candidates for the new government to the people on independence square, presented them, and requested the blessing of those people and they got it. there might be more horsetrading , but we do expect the candidate to be ahead -- the head of it. >> let's talk about that. the financial situation is a big factor. he will have to think about that. a developing situation -- the ongoing and developing tensions with russia and in the crimea.

>> the u.s. has said they will pony up $1 billion in loan guarantees. they're confident they can strike a deal with the imf. a partial restructuring of debt would not be necessary if there was a deal with the imf. .efault is not on the cards as for the geopolitical tensions with russia, that is a big issue right now, particularly in crimea, the southern peninsula of the ukraine. at about 5:00 this morning, 60 gunmen seized the crimean parliament and they are basically holding camp inside. they lower the ukrainian flag, raised the russian flag, and have said nothing since then. they intend to use all legal

orderto intend to restore in crimea. issue the new prime minister has to deal with our immediate threats to the country's territorial integrity and establishing order. then there are the financial issues. >> thank you very much indeed. the latest from the ukraine. relatingashing details president.er thetill considers himself rightful president and he is speaking -- seeking russian protection. russia put fighter jets on combat alert near the western border. we will get you more on that.

the latest from inside the parliament. rbs has posted its biggest loss since 2008. more on the numbers. disappointing. ceo on a bank saying we are the least trusted company in the least trusted sector. brutal. this -- weent bought are way off. this bank has 35 billion pounds of losses in the last year. this bank has just delivered the biggest loss since 2008. these are big numbers. was coming. a loss

the delivered in quite a dramatic way. we do not have a number on job losses. we do not know what is going to happen with citizens bank. are an investor, where's the incentive to buy right now? >> it is not done yet. >> we do not know what the restructuring is going to be. that will be a big one. this man is a retail man at the end of the day. it in, make itn more of a corporate retail bank -- that is more politically palatable. .07.want this back at 4 >> thank you very much indeed. shares are climbing in hedge funds. caroline hyde here with more. >> climbing up more than 11%.

they announced their full year for 2013 and came out with plenty of positives. the positives are numerous according to rbc. some $54manage billion. they are buying back $150 million worth of shares. all in all, there seems to be a turnaround going on. an chief executive after focusing on cutting costs, changing management, buying back this environment. it looks as though the process is working. profitable trades earned almost $2 billion in assets. 8.88% in thel down last few months.

there are still better stocks out there in the universe. fund they run is still losing money. fund that relies on computer algorithms. they are still sounding a little bit cautious. do not get carried away. 11.6% -- the best day for man group. indeed. you very much caroline hyde, our european business correspondent. flights will be available to the for 10 euros.r margin for wpp hurt.

how janet yellen would like to offer the fed's guidance. weaker than forecast data. the economy may be starting to slow. in part from the harsh weather. after the break, we will go to our top interview of the day. lego's ceo. he is live in denmark. soundyou want to hear the of 2000 pieces of legos? it is pretty noisy. i will be back with an interview with lego's ceo. stick around. ♪

>> welcome back. you were watching "the pulse." continuing tensions surrounding the ukraine continues to have a dramatic effect on its currency. it has been falling over the last few days, every day on a dramatic basis. you see a dramatic drop for this currency if you extrapolated further. -- extrapolate it further. it looks like it is

accelerating. let's go back to david tweed. insideontinue to look the business of the economic building block that is lego. here is david tweed. at the lego headquarters in denmark. it is a great guest, the chief executive officer of lego. the man responsible for turning this company around. thank you very much indeed for having us here. we have had a fantastic day. i want to congratulate you on the success of the lego film. three weekends, top of the box office, did you have any inkling that it would be so successful? >> we are pleasantly surprised. it has been a phenomenal success. >> do you think you will see -- have you seen any translation

into sales? >> it is too early for us to comment on that. i think we will see a great effect on sales. >> you have had incredible success with other movie franchises, but never the success with a lego franchise. i saw that your sales this year are up 10%. that is a bit of a slowdown from the 25% we saw last year. does it mean that lego will not see those sorts of growth rates again? >> over the past nine years, we quadrupled the size of the company. suspecting we are reaching a level of penetration in the western developed market. extremely grateful for

that. they are huge markets. the company has such a size that organic growth is more likely to be high single digits rather than double digit growth. we are determined to not make an acquisition. we think there is something unique about this company, its culture, its engagement with its consumer, tied to the lego idea and brand. would be destroying that by bolting on another company. you asked the fundamental question when you came on, what is lego? >> the fundamental idea here is that you put pieces together as if they were glued and in fact they are not. they can become anything that you can imagine. it can be endlessly creative.

but you can easily take them apart. >> is that one of your business cards? >> that is me. with a lot more hair than today though. >> it is a construction material. lego willmean that always be a single construction material? >> lego is extremely focused. the potential is that the world i feel the wind is in our sales. countries are becoming wealthier overtime. >> one of the things we have been talking about is this relationship you have got with the consumer. you came up with the lego friends concept. you got closer to the young girls who are using lego. what other products are in the pipeline?

>> lego architecture is a great example. that grew out of a consumer event in washington. there was a young man, an architect, and said, you want to build buildings. this is an idea that was bigger than star wars. said, ok,t that and let's explore this. we are developing our own lego architecture section -- they are becoming bestsellers. >> here is my final question. who is your favorite character from the movie and why? >> i think it has to be emmett, the main character. >> we can have a look at him over here. >> the story of the movie is really about breaking out of

conformity. andearns that the hard way he understands that we all have creativity inside of us, we'll have development potential. that is the great point of the story. what a pleasure it is to interview you and see you smiling about all of the characters. thank you so much indeed for having us here at lego. die, back to you. -- guy, back to you. much indeed.very fascinating company, fascinating interview. detailsbring you more in a moment on the breaking news. cyber security heads underground. we will see you in a moment. ♪

>> good morning, everybody. you are watching "the pulse." we are streaming on your tablet and on bloomberg.com. no rest for the soaring winter olympians.

the ski jumping world cup resumes in sweden. 133 meters to secure gold. that is an awfully long way. day one of the cycling world championships. took a stunning lead in the men's individual race. are the markets on track this morning? the company stories delivering? manus cranny joins us at the touchscreen. is europe's largest insurance company. dropping in the asset

management business by 23%. that is still the headline. property and casualty insurance is the only bright spot. let's move it along. global advertising business -- this is the company run by a friend of bloomberg. the stock is down the most in four years. foreign exchange is eating into the business. wpp is not just a digital towardbut also moving emerging markets. that takes the shine off the story. finally, when it comes to a cup of coffee and a good bed to sleep in, these guys provided all. be of the new rooms will inside london. back to you. >> thank you very much, indeed. we will show you how one new

venture is making a move to break into the u.s. market. also coming up, back underground with hans nichols. we will be under a swiss mountain insecurity. we will see when a moment. ♪

>> good morning. welcome back. bloomberg'srom european headquarters in london. francie locke what is off today today.cine lacqua is off elliott has more. >> the fund is called ine ventures. what is the big idea here? early-stage in

high-tech startups. the general idea is to hope companies relocate to new york and philadelphia. the research and development will stay here in israel. we are investing about $300,000 into these companies. we are bringing them over to the united states. right now, whether it is the tel aviv stock exchange, they are trying to build tech companies here and not moving them to the united states. >> there are two philosophies. to stay and grow and build and enter the u.s. market at a later stage.

but what we see here in israel and being in the industry for 50 years in israel is that so many new startups are popping up every day. the lack of funding in israel is getting smaller and smaller and the amount of companies that are popping up each day because of platformss to cloud is more and more companies with less and less money. the preface of the fund is to get them at the united states, helped them with the execution of the operations, and see more of those companies succeed quicker. in israel, more companies fail, not because of technology, they cannot get to the market quick enough. >> in silicon valley, there are some in the israeli tech companies. there are quite a few on the east coast as well. why is there this cap? -- gap? >> you go to sunnyvale and

places in the silicon valley -- the gap is that a lot of companies do get there on their own or in the valley they go with an accelerator that helps early companies. not many companies are trying to come to the east coast. second largeste amount of venture capital funding. more and more israelis are going to the east coast. there are many that want to figure out how to get there. we want to focus on mobile and sas companies. partners thatle will be working with us on the investment side. only invest if there is a way to get to the united states.

you call us a fund, an accelerator, whatever you want. we are focusing on the operational side, with a whole mentoring program of 150 people. city know that new york wants to invest in israeli companies. they will not invest well they are over there. >> and new fund the launching to encourage israeli companies to move over to the east coast, to get there before coming back your to israel. back to you. >> thank you very much indeed. let me bring you up to speed with the headlines. german unemployment fell for its third month. companies become more confident in the nation's recovery. inflation looks like a concern. rkel will address both houses of parliament in london

today. and she will have tea with the queen. she is expected to call for stronger european union ties during her visit. we need a big market, so england is one of the big markets. we need to deepen the institution. we need to agree to move forward. to move forward, they have to have their own way. >> ukraine's opposition leader has won the support of the cabinet. his acting president says lawmakers are set to approve the new prime minister today. secretary of state john kerry is formulating a $1 billion loan torantee for the ukraine ward against intervention by russia. we have just completed an will play out in

the next 30 minutes. we are really looking forward to what he has to say. also looking forward to what manus has to say. let's find out what the man -- markets are doing. >> probably not as important as what the new head of the ukraine has to say, but markets are looking at a new high. are coming under the most pressure. we are waiting for janet yellen later in the day. in the u.k., we have the minors coming under pressure. china is still a story. bear that in mind. when it comes to the labor market, we are seeing quite important moves. we are getting rights issues. the final dividend is not simply justified.

rbs -- a 48 billion pound pail out. -- bail out. major losses over the five-year period. the big debate is what is happening in china? it is moving from these currencies and there is movement in terms of what the government is doing to affect growth policies. u.s. equity futures. it is all about janet yellen in terms of whether that is moving any inch at all. 0.25%. are lower by back to you. indeed. you very much in 20 minutes, "surveillance" will take over on the air. what do we have for today, tom? >> great unrest in the ukraine, kiev or crimea.

we are thrilled to have halima croft on this morning. will join us from harvard business school. kenneth feinberg. his work with the public services on the president's comments. we will talk about the due of the -- doability infrastructure in the united states. 1.0183. 101.83. intensions are ratcheting up a way that has taken a few people by surprise. the politics, the history of these two countries probably should not -- should tell you

that something is going to happen. thank you very much indeed. , tensions rising in the ukraine. we will be live in that country as kiev and moscow face-off. we will also ring you an interview with the prime -- we will bring you that interview and house. ♪

>> welcome back. >>you're watching "the pulse." we want to take you back to the ukraine now. speakinggue has been to the new interim prime minister. let's go straight to him now to get his take on what he has learned. iswill find out exactly what next for the country. give us the latest. >> the ukrainian parliament is reviewing the candidates for ukraine's new government. this would be a caretaker government for the next few months. the prime minister would be arseniy yatsenyuk. we expect the government to be approved by the parliament. i spoke to arseniy yatsenyuk. ago he was in opposition leader leading

protesters on independence square. now he has a situation in crimea. that is ukraine's peninsula in the south. one of the parliament buildings there has been seized by a a group of about 60 armed men who have raised the russian flag above it, an indication of the urges to secede from ukraine that we're seeing right now among ethnic russians. when it was the opposition -- rather, president yanukovych was in power, it was ethnic ukrainians who were talking about seceding. legald he would use all means to resolve that. he still has to be voted in. then he has the financial crisis. the u.s. is ponying up one billion -- $1 billion in loan guarantees. he is the man who has to cut the deal with the imf.

he thinks it is possible to avoid the haircut for ukrainian bondholders. he said he will be an extremely unpopular leader because he is going to have to take on extremely unpopular measures like raising gas prices, cutting expenses, so that they can meet the conditions that the imf is going to put forward. he has a lot to deal with, in addition to the troubling geopolitical situation he will be facing with the west on the one side and russia on the other. >> i think we have just been able to access your interview with the designate interim prime minister. let's have a listen. >> assuming that you are voted in as prime minister, your first job is what? to provide security and stability in my country. to fix an ongoing economic

crisis and to deal with the imf and the european union in order to get the financial support for the economic situation. to provide securities and to protect people and to defend the territorial integrity of my country. >> how concerned are you about crimea? >> we are committed to the territorial unity of the country. we will do everything we can come everything possible, we will use all tools and legal means in order to several eyes -- civilize the situation in crimea. >> $35 billion to cover the liabilities. our you confident you will get that money? >> the treasury is empty. we need the imf package and the european union. is going tornment

take very unpopular steps. we are in a great mass. i am to be the most unpopular prime minister in the history of my country. this resembles grace. -- greece. , this is the government which is to stabilize the situation and i would never promised any kind of huge achievement. the first and most important issue is stabilization. >> people are talking about the prospect of a default. the bond market seems to be telling us people are confident that you will not default. what do you think? >> we will do everything not to default. if we get the financial support from the united states, from the

european union, from the imf, we will do it. >> you did not mention the $15 billion from russia. want to build up a new type of relations with our russian partners. i would underline and indicate partners. we want russia to be the real totner and we want russia have deference and fair relations with ukraine and to speak to our multilateral and bilateral obligations. >> are you concerned about the prospect of some kind of military intervention from russia? they have these exercises going on. do you think they could send in troops to ukraine? russia is neighboring and we believe they are strongly -- strongly believe they are

friendly and that they would never intervene with military force in the ukraine. russia's black sea fleet is deployed in crimea. the russian government is controlling their military forces. believe that there is no chance for any kind of military intervention on the ukrainian territory. signators or the budapest memorandum to provide an secure territorial integrity

and unity of my country. >> one must question. -- last question. what is the likelihood that bondholders will be asked to take a haircut? >> it depends on the imf totals. if we get the imf on board, we will civilize the situation and stabilize it. talking there to the designated interim prime minister of the ukraine. ryan, in terms of the priorities and ordering what he has to do now and dealing with the russians, which does he see is job number one? >> i think he thinks the job number one is financing. a threat that this country could default. they need to come up with an awful lot of money by june to stay afloat.

he will have to negotiate with the imf, the u.s., and the european union to pull that off. he is reasonably confident about that. the problem he is hoping will not become a bigger issue is russia. we have russia conducting military exercises on the ukrainian border, it side of the ukrainian border. we have a conflict in the south of ukraine in a mostly russian speaking area that has historically been part of the russian empire that is now in ukraine, where some gunmen have seized a parliament building. i think he is hoping that those will lead to larger issues -- will not lead to larger issues like crimea wanting to secede. we are not at that point yet and quite frankly, he has not even got voted in yet and he is hoping that will happen over the next couple of hours. that would be an extraordinary amount of challenges for brand-new prime minister to take care of in just a few months as

he prepares the country for a snap presidential election at the end of may. >> we will wrap it up there. fantastic interview. headlines broken during that conversation you were having with him. on the ground in kiev. let's get another view on that interview. in the area joining us now. what did you make of what he had to say? are on the same lines of what the interim prime minister does outline. for the interim incoming government will be to stabilize the situation in the state. and to secure a financing from theor the ukraine imf and the european union in the meantime and avoid a potential default. >> he said he will be the most unpopular prime minister the country has ever seen.

he will have to make changes to the way the country operates at a macro level. petrol to bondholders. how is he going to manage all of that in the time frame? >> he is quite likely to be the most unpopular prime minister ever in the ukraine. these are changes that governments in a normal situation would find very hard to implement, especially changes to the subsidies. atare not only looking households being hit, but major industries being hit. also, in terms of the way the whole system is set up -- these changes will need to be done fairly fast. the risk is that they may be watered down to a popular consensus.

or the speed at which they are introduced may affect them. at this moment, we still have a situation of civil unrest, especially in crimea, but also in kiev. there are defense units in the streets. this situation, any sort of aggravation of public discontent could lead to some secessionist ambition. at the moment, we are saying that the governors of the eastern provinces fell short of calling for separatism. they called for increased self-governance until the situation in kiev can be settled down. up in ae going to end situation where ukraine and betweenimbo, half were the european union and halfway between russia, but not really having a strong place with either? >> if we have protracted civil

unrest in the ukraine. perhaps an aggravated situation in crimea. at this point, it seems that the european union is going to make moves for the ukraine nevertheless. >> people saw parallels between the ukraine and georgia, but the situations are quite different. we have systematic differences between the situation in georgia and the situation in the ukraine. ukraine's territorial boundaries budapestnteed by the treaty. itsecided to give up nuclear arsenal and its boundaries were guaranteed. borders a number of nato countries.

ukraine is a much larger country than georgia. it is the second largest country after russia and europe. it has 46 million inhabitants in russia. -- in the country. ultimately, we hope they agree to maintain the territorial integrity. >> do you think russia will be prepared to talk money? do you think they will be prepared to put up money? the finance ministry has already said that they would be willing to talk to the incoming government on potentially offering unlimited financial help and they would be looking save the obligation that they have to have russian companies.

ukraine owes about $3 billion to kiev. , you look things up at the history surrounding these countries. you get the sense that russia would be unlikely to let go of the ukraine very easily. surprised they have been so quiet on the subject so far. >> i do not think that russia has been very quiet. >> putin himself. >> oh, putin. we have seen a number of things from the foreign ministry, especially moscow, on the ukraine. well russia is making strong , onements on the ukraine

extremist thinking, but on the other hand, they're willing to talk to the new government. >> thank you very much. that wraps up our program. we will see you tomorrow. ♪

>> this is "bloomberg surveillance." >> armed forces sees parliament in crimea and raise the russian flag. the ukraine foreign ministry urges talks with russia.

markets are moving as we speak. confronts financial failure. at the university of north carolina, nobody can fail on athletics. this is "bloomberg surveillance ." it is thursday, february 27th. joining me, scarlet fu and adam johnson. a very busy "surveillance" this morning. >> time for the morning brief. german unemployment falling for the third month. italy's 10 year bond drops -- thatdust below 3.5% is a good sign. spain's economy expanded 0.20% -- that was less than expected. durable goods orders and initial jobless claims. the kansas city fed