>> near the point of no return. ukraine's president warns of all-out war as russia braces for tougher sanctions. draghi. the german chancellor, the french prime minister, both take the ecb chief to task. this ahead of mr. draghi's talks today with president hollande. a bloomberg exclusive. speakas shares jump, we to the advertising giant's ceo. good morning, everybody.

first of september, back-to-school. you are watching "the pulse." we are here in london. i am guy johnson. let's get straight to our top story. the conflict between ukraine and russia taking another alarming twist. ukraine's president has warned the crisis is close to the point of no return. eu leaders have given the european commission all week to draft sanctions against moscow. we are joined by ryan chilcote who has been reporting about russia for quite some time. >> it is true. >> let's talk about this in a little more detail. let's talk about the sanctions story first of all. >> sanctions are looking more likely than they have in the recent past. the question is, what shape they might take. the reason why sanctions are likely is that the threat from the european union on saturday was that if the situation worsens, then there will be sanctions. the situation in ukraine has worsened.

two events i would .2. one is president putin yesterday saying that the talks in ukraine between separatists and the government should focus on statehood. up until now, the conversation has been about russia would like to see the federalization of the country. they would like to see more autonomous powers for the eastern part of the country. is ushered by the russian president. it is provocative, unnerving for the government in kiev. the president are spokesman said the russian president isn't calling on independence for the country, but all the same a lot of people concerned that russia may be looking to create a buffer between it and the form of a country that would be recognized by no one other than it, and ukraine. thing, pro-russian rebels yesterday opening fire on two ukrainian naval ships just

hours after the european union made this threat of more sanctions. that will be qualified as a worsening of the situation. the caveat is always this way, 28 countries, they make decisions unanimously. it is never easy to do that, particularly when that unanimity is required when it comes to posing economic pain on russia. >> let's talk about nato. the nato meeting this week as well. an organization that some say has lost its meaning now has a clear meaning. it will be interesting to see how this one shakes out. it puts the western military funding may be on a more clearly defined path. >> first off, that means meetings on thursday and friday. president obama is going to go to estonia. you talked about article five, that is all about the u.s. president saying to russia, don't touch estonia.

don't touch the baltic countries. they are part of nato. we will defend them. this is the second time a u.s. president has visited estonia. the other thing to point out, ukraine is now asking to join nato. that is not getting a lot of traction within nato itself. at that meeting, i think we can expect to hear a few things. one is all about ukraine. two, we are going to hear a plea from the u.s. and the united kingdom that nato countries need to up defense spending as a portion of gdp. finally, we are hearing that the u.k. wants to lead a force of about 10,000 troops, service members from seven different countries that would be a quick reaction toward the east of the country to counter possible russian threats in the future. >> we will talk about the ruble next time. thank you very much indeed, ryan chilcote on russia.

which apparently you have been covering for 20 years. doesn't look at a over 30. mario draghi's signal has complicated the debate on how to avoid deflation. on one hand, france's prime minister is urging more action from the ecb to reduce the value of single currency. angela merkel reportedly called draghi to clarify his stance on fiscal discipline. let's figure out what is happening here. bloomberg news reporter joins us now from paris. the brakes are on draghi. we have had the prime minister and looks like we are going to have a call between draghi and hollande as well. what do the french want? the french want easier fiscal rules and monetary policy. they are not unhappy with draghi. they think draghi is on their side in a certain sense. he was very much on the side of not being so obsessive about deficit rules.

he opened up the door to quantitative easing. i think the french think that draghi is going in the right direction. they would like more. the french feel that the germans are more isolated. you have people like ramsey and hollande in europe, now you have draghi as the head of the central bank using words such as flexibility. there should be more flexibility in how fiscal rules are applied. the imf, the u.s. have all been pushing against the german fixation on these deficit rules. that ifthe french feel anyone is on the side of majority opinion, it is them. bank that a central claims to be independent, yet it is increasingly looking like the political process is having a meaningful impact on how monetary policy is being pushed forward. i guess that is inevitable.

how influential do you think these politicians will be? they used to say, i hear but i don't listen. do you think draghi is in the same camp? >> i think draghi is just looking at the numbers. the numbers are bad. the german economy contracted. the french economy is not growing. i don't think draghi is responding to political pressure. i think he is just responding to the figures out there. inflation is way beneath the target. they have a target of close but not above 2%. that is a target they have to hit on the upside and the downside. i don't think draghi is taking his orders from hollande. i think he is just looking at the numbers and making his own decision. as for putting pressure on the ecb, everyone, whether it is the germans or the french, it comes out do the same sort of political pressure on the ecb. greg --

>> greg, thanks for joining us. let's stay with the french angle to bring you a bloomberg exclusive. we have been speaking with the ceo of havas. mark barton got his reaction. >> i think the euro is a good question. growth haveopean had a bad surprise in their regions. question.e broader the euro is slightly going down. inbe we will have a surprise the coming half. for sure, we have had an impact on every other european-based group. , one of europe's top stock gainers. first-half revenue beat estimates. more from our exclusive interview with the ceo of little later on "the pulse."

let me bring you another exclusive. we have been speaking to the ceo of pierce chrysler. -- fiat chrysler. sergio marchionne says the merger may take place on october 13. >> the run out. bethe run out period will october 24 by our calculations. it happens to run into a weekend where there is a transfer of systems. the mug likely date for a u.s. listing is october 13. >> the ceo of fiat chrysler, sergio marchionne. more from him later. a little tease to get you in the mood. let's talk about the data today. chinese manufacturing expanded at a slower pace last month. the economy is beginning to lose a bit more momentum. 51.1 for august. hsbc manufacturing gauge came in

at 50.2. let's put it all together. tom joins us from beijing. first of all, what is the story behind these numbers? was a lot ofere optimism coming into the third quarter. we saw a strong rebound in second-quarter gdp growth. it seemed like the government had done and off to push the government -- the economy toward their gdp growth target for the year. we had a bunch of numbers which called that into question. july's lending data was disappointing. august lending data is compounding those concerns. august pmi data pointing to a slowdown in the factory sector. slowdown in the smaller private firms. the needs the headlines, if you drill down, output is looking weaker. export orders are looking weaker. new domestic orders are looking weaker.

fairly gloomy data out of china today. >> put it all together. the equity markets rallied today. i assume that means the market is anticipating that bad data is good news when it comes to stimulus. marketink the anticipates the run of weaker data that we have had from china will put pressure on the government to do more to stimulate the economy. of course, there is more going on for the chinese and the hong kong markets than just the macro data. the markets are also anticipating a coming link between the hong kong and shanghai market, allowing capital to flow across the border. that is something which is bullying invest -- buoying investor confidence. in terms of policy formulation, what is the expected outcome at the moment? is the risk that we get more

rather than less or the other way around? coming out of the second quarter, it really seemed like the government's approach, targeted micro-stimulus, had done enough to buoy the economy. the later signs have dented some of that optimism. july's lending data was weak, the weakest since october 2013. real estate data shows that sector, the main contributor to chinese domestic a man, continues to contract. of course, today's pmi data was weak as well. i think this is going to tip the balance toward additional stimulus for the chinese economy. >> ok, thanks for the reporting. tom orlik out on the china data. coming up, eu leaders vow to hit russia with sanctions. will russia change course in ukraine? now reached aict

point of no return? we will take a closer look. any market relevance here? we will find out. ♪

>> welcome back. you are watching "the pulse." let's get back to our top story. the eu vows to slam sanctions on moscow as the ukrainian

president, difficult to read there, said that the conflict has reached the point of no return. russia on the brink of a full-scale war? we are already in a war, aren't we? this feels like a war, looks like a war. that is where we are now. >> by all accounts, it is a war. thatems that gradually, position that this is an internal rebellion has been updating. -- abating. increasingly, references to a state of war. the though everybody saw policy makers short of calling it an invasion because of the implications of escalating the sanctions against russia. but they do call it a military aggression. they call it incurred in. -- incursion.

>> if you extrapolate and look at the outcomes, federalization looks like the most likely outcome, just a question of the degree of federalization and the level of autonomy granted to the region. is that the most likely outcome? hasn the first place, this been a problem since the beginning. ukraine was and is willing to give power to the regions and the municipalities. it is a question of whether this is going to be a structure where individual regions which would then become states would have decision-making power in foreign policy, economic policy and defense. tfthis a situation in which is willing -- kiev is willing to surrender to the demands russia has been putting on it since march?

or are they going to fight and try to mitigate that outcome? is that a feudal conflict? moscow has so much engaged here. it once some sort of sphere of influence that it can use as a buffer. it fears the west. putin is not backing down. he has an 84% approval rating. >> ukraine has a number of choices. they don't have to go for a federal structure. in the case that they would have to give it up, they might as well just give it up and leave it in russian sphere of influence. that would be a way to cut the losses for kiev. they do not need to accept the russian solution for ukraine. they could accept the fact that ukraine needs to go its own way.

the outcome is still possible. federalization of ukraine is something that russia is demanding, but it does not necessarily mean they would actually get it. >> are we seeing another case in point of why sanctions have a very mixed success rate? >> indeed. the sanctions in this case are a show of force, an attempt to change the policymaking in russia. which are clearly not working. but once the eu and the u.s. have chosen this way, they have to continue. they have threatened to increase sanctions in the case that russia does not disengage from ukraine. russia will not disengage from ukraine in the next week or so. therefore, the escalation of sanctions is almost inevitable. it is not going to be the sort onall-encompassing sanctions economic operations with russia that everybody would the

expecting but it is going to be a toughening of the system we have now. more for domestic reasons? >> it is a show of support. it is a policy that could work if the sanctions are more than whatever the other country is trying to achieve. in that case, they would work. >> when you look at the policy formulation that moscow is conducting at the moment, can i extrapolate that -- there has been a lot made of the fact that putin is interested in a wider russia. obama is going to go to the baltics this week. maybe there is going to be more nato boots on the ground, nato seems to have refounded its reason for existence. do you think there is any serious risk? is that for more domestic

purposes or is that actually a reasonable show of force? i am wondering how policy is being made here, whether the threat is real. >> it is a reasonable show of force. if you have seen russian actions, many of them have been designed to test the response of the western side. nobody wants to test the response of what would happen in the baltics. there have been multiple incursions of both russian aircraft and the russian fleet into the territorial waters and airspace of the baltic states. my understanding is it was over 50 in the past three months, an absolute record. they are probably testing preparedness and the reactions wouldt sort of actions implement. whether they are really testing, that would be a bit too much.

it is how much of a commitment and preparedness to protect the baltics. >> nice to see you, thank you very much indeed. come, the remote access resort reached via power glider. we had for a tour of the world's most isolated hotel. that is coming up later on "the pulse." ♪

>> welcome back. you are watching "the pulse." we are live on bloomberg tv, on the radio, streaming on bloomberg.com. also on the markets. manus cranny joins us now. >> truly omnipresent. purchasing managers index tells a very realistic story, which is that italy and france are under tremendous pressure. they are sub 50. under 50 shows contraction. that's what it is telling you about economy number two, economy number three. the challenge for the european central bank, to reform these countries. if you go down there, to greece, they are growing. manufacturing came in at 50.1. those are the issues at play that the european central bank has got to deal with this week. not least the political situation of russia and ukraine

in terms of the impact on growth. stopest this morning said worrying, stop getting so obsessed by germany's relationship with russia. he said 5% of their gdp was tied to russia and perhaps we were somewhat over exploding the situation. there is a standout. apart from ireland, the smi. novartis looks like they have found the golden pill. novartis more or less said, are you sure you have got the right numbers? stock up 3.2%. ,tanford bernstein say the pill risk ofwill reduce the heart failure by 20%. potentially is worth $8 billion. we have 20 seconds. goldman sachs, i love goldman sachs. parity bychs calling

2017 on euro-dollar. back to you. >> we are going to talk about london when we come back. ♪

>> welcome back. you are watching "the pulse." we are live from bloomberg's european headquarters in london. these are the bloomberg top headlines. pro-russian rebels have attacked two ukrainian coast guard vessels just hours after eu governments agreed to impose new sanctions on russia if the conflict worsens. the sanctions may target the nation's capital and finance industries. ukraine's president says the two sides are close to a full-scale war. is french prime minister urging more action from the ecb

to lower the value of the euro. the german chancellor reportedly called mario draghi after he backed public investment programs to spur the european economy. a german magazine says that she wanted to know the ecb has changed its course on austerity. sending antitank weapons and assault rifles to iraqi kurds. this lifts the german taboo on shipments into war zones. the islamic state has captured large parts of northern iraq territories in syria. the continued violence across northern iraq, there are some local companies making money. security guaranteed by american military forces. businesses, the u.s. military help them make their money in the first place. kurdish regional capital a city under siege.

is the influence of the islamic state grows, the extraordinary growth here has begun to slow. in this boomtown, business leaders are facing a new reality. >> talking about the isis situation, it was a big surprise for us. you would never think we would have these neighbors like what we have right now. >> in downtown irbil the dr group may operate out of a small building. but over the past decade, it has become a big business. mohammed started this family firm before handing over to his sons. the siblings govern their growing empire like a board of directors. all of them specializing in separate sectors. >> an comes to the table and the numbers are showing -- we sit

down and mostly it is approved. >> diyar has been head of the company since 1992. 10 years later, the american military arrives in iraq and kick started corporate cash flow. the 101st airborne division commanded by david petraeus contracted diyar group to build, clean, service u.s. army bases in mosul. >> we were able to make a huge business with general petraeus. , hugeording to diyar business with the u.s. army meant tens of millions of dollars in contracts over six years. at one point, he says profits topped $1.5 million a month. today, the group employs thousands and is one of a handful of curtis companies to dominate the country's largest

infrastructure project. most of thever business because we have enough cash in our hand. kurds are running businesses all over iraq. onlyyar's firm is one of two electricity suppliers in the whole kurdish region. industries must often operate independently. opened this new oil refinery, there were no government sanctions insight. and no government approvals on site. the islamic state's recent capture of iraq's largest oil refinery had pumped up gas prices and potential profits. >> the market is very good right now because there is a big request after the refinery was closed. has spent $5 million over two years on this refinery. he expects to make that money

back in around six months. refine 6000l barrels of crude oil a day, producing low octane gasoline, diesel, kerosene and daily profits of around $30,000. the eldest of the brothers wanted to show us his proudest project. a construction site that he says will one day be the largest mall in iraq. 1.5 million square feet? >> exactly. >> the new headquarters will be in kurdistan's tallest building, dreamt up by brother number four. >> where would your company, your family be, without the u.s. military? >> i cannot imagine. here --ng you see ago, the u.s. military's overthrow of saddam hussein helped businesses in

kurdistan take off. now, airstrike from that same military against the islamic state inshore companies here could survive and company owners continue to thrive. >> no idea how much money? 10 million, 20 million? >> more than 20 million. >> american air power has long secured most kurdish borders. ultimately, it is only filling just a few kurdish pockets. >> now, we will bring you back close to home. data out this morning when it comes to the u.k. economy. manufacturing data is out. light is one description of it. 52.5. we were estimating 55.1. a little bit of a mess on that. a little light in terms of the

estimate. quick look at sterling, let me show you how it has been reacting. a heads up on what is going on. weaker, aking at a little bit weaker. anyway, talking manufacturing and talking about britain's aspirations to maintain itself on the global stage, let's talk about what is happening when it comes to heathrow. britain should back the development of a single hub airport, that is what the federation says what inshore long-term economic growth. let's talk about this. bloomberg's aviation reporter joins us now. we need a hub. doesn't say where the hub should be. >> they were quite careful on this point. the report was quite general. it focused on this issue of hub versus point-to-point.

they are actually submitting this to the airport commission that is assessing this issue and they wanted it to be very factual. with that in mind, they were looking at the issue of, if you have a hub airport, will it connect you to more emerging markets? they found that it did. they found that the hub airports , those are connecting to more emerging markets. the reason they are doing that is because they can access transfer passengers. catchment having areas in the city, they can have a catchment area of the entire country. that creates a virtuous circle, is the term they use. once you have a link, that creates more trade and that creates may some tourism. >> is this good news for heathrow or gatwick? >> i think it generally would be good news for heathrow. heathrow came out with a statement.

they said they were quite obviously backing heathrow. in terms of the business side, gatwick is saying that in terms of point-to-point, it is more of a tourism thing. it is very important to know that cbi didn't throw gatwick out. they said both are important for competition. they said in terms of ticket prices, it is great to have two very vibrant, busy airports. in terms of the business side of it, they very much came down on the heathrow side today. >> ok, boris johnson had this idea that we should build an island east of london. this doesn't sound like it is going to fit in with the cbi plan. >> cbi said they want spades in the ground by 2020. they are very much -- howard davies who was heading up the airport commission, they want something to happen. in the next two weeks, there is going to be a decision on boris island, this estuary airport.

it wasn't shortlisted earlier this year, but it is over -- either going to be in or out. that is going to happen in the next couple weeks. the final report will be some time after the next election. we will have to see whether the hub airport is in or out. if it is out, it will be interesting to see what the mayor of london does and whether he backs heathrow. he has been vocal about being in favor of a hub. that would suggest that he would back heathrow. >> you would have thought given his recent change of desire when it comes to political aspirations, that a little bit as well. thank you very much indeed. the battle surrounding london's airport expansion. coming up, more from our exclusive interview with the ceo of havas. ♪

>> welcome back. you are watching "the pulse." havas shares are rising today. barton spokeark with the ceo of the advertising giant. mark asked about austerity in france and its impact on business. >> i think it is a good question. hasou look at spain, it

nothing to compare with france in terms of media business, advertising investment. it has not recovered at all. france is totally flat. the question is not about austerity. i think it is where you put investments. the combination of making in someand investing productive way. it is a combination of both. it is not austerity or investment. whether you put austerity and where do you put investment? >> i have to talk to you about consolidation. the big news in 2014 was the collapse of the merger between omnicom and publicis. did havas benefit from that at all? clients fromn

either of those companies? >> i think it is very hard to quantify what were the benefits. thesee can assess is that productive mergers accelerate the base of adapting to the new reality. we move quite fast, our ,rganizations, during the last during the end of 2014. so i would say that in the first quarter of 2014, we were ready to fight. happen, hard to say what could have happened. arehavas, the fact that we

having the best growth of the due to adustry, it is combination of many factors including this one. >> your father is the biggest shareholder in havas. he is also the chairman and a shareholder in vivendi. many saying that leads to the logical and point of some sort of tie up between havas and vivendi. is that something that could be considered in the future? >> to be honest with you, there is a lot of question about that. i would really say, what i think has a greats standalone strategy. that has shown great results. for now, we are really concentrating on what we are doing on a standalone base. >> so you really believe the smaller firms can compete

staying a stand-alone entity? you think that you can compete with the big four? scale, from what you are saying, doesn't actually matter. opposite, i think scale matters. it is like a heavyweight fight. , but itportant to scale is important to be fast. with 16,000 people has scale. if you have seen what happened has solandscape, havas much business. for sure, we have the scale. lean andying to remain a giant. >> how do you compete against the startups? those new, much smaller companies that are biting at

your heels? these are companies that ultimately are trying to satisfy clients who are looking for ideas, no matter how big or where these ideas come from. how do you compete with that side of the business? >> i think it is a very fair and positive competition. adapt to thiso new reality. , despiteay that havas the fact that we are a big group, we still try to keep this start up way of thinking, to think out-of-the-box. we still have this start up mentality. i would say that this new competition is stimulating us. as speaking to us

exclusively. more on that interview later on in "the pulse here to -- "the pulse." let me bring you today's hotshots. one of the biggest events of the year in mountain biking. the world's most daring prose gathered in whistler to show off their skills on the extreme course. the gold medal went to the canadian number one. and, surfs up in indonesia. it was the perfect weekend to catch the waves. a star hawaiian surfer took on some epic double barrels and managed to catch all of it, of course, on his go pro. i don't really need to talk on these points. you just show the pictures. amazing. clean cloud initiatives. we are going to take a look at the growing push to make big

data centers as green as possible. the tektite things are targeting energy efficiency. details on that when we come back. ♪

>> welcome back. you are watching "the pulse." in today's new energy, the push for the clean cloud. the initiative is being wrapped up. tech companies are looking to

make data storage services more green. rankow do the tech titans in terms of energy efficiency? joining us for more is andrew, the head of i.t. for greenpeace u.k. the cloud is massive. e spent a lot of time talking about the scale of the cloud. in terms of its energy footprint, how should we think of it? >> growing. as we live more of our lives online, whether it is sending videos, e-mails, tweets, the energy of the footprint is growing hugely. probably about 10%, 11% per year. morningd somewhere this that if you classify the cloud as a country, it would be the sixth largest energy consumer in the world. >> it would rank about six. that gives you an idea of the and normandy of the power --

enormity of the power-hungry nets. >> the power is there to drive it but also to keep it cool as well. aboutat makes you think where people are positioning these things. some companies are putting them up near the nordics. u.s. geothermal. who is doing it well? >> good question. you mentioned the nordics. launched aast year, new data center in sweden. poll.e they call the node that obviously makes sense in many ways. all youryou can't have data centers in places like sweden. it is very important that you get your strategy correct. report, the clicking clean report, the latest edition

of the report out earlier this year, we basically cited companies like google, apple, facebook, as being leaders in this sector, really driving renewable energy. is a legacyy there affect here as well. a lot of these data centers were pre-positioned. is the direction of travel right? we are just dealing with legacy issues and have to figure out a way to reengineer? >> yes, i think the overall direction of travel is correct. i don't think we should underestimate the amount of effort we have to put into this. keep below the two degrees of warming, we really need to make a really big effort in this area because of the growth. it is not enough to just tinker around the edges. things like energy efficiency are really important.

that alone is not enough. it is not enough just to get your existing data centers more energy-efficient. that won't solve the climate problem. bebriefly, is it economic to more energy-efficient when it comes to data centers? presumably it is. you are pushing on an open door to make this happen. >> yes. it does make absolute sense to focus on making your data centers more efficient. absolutely. when you look at the growth of the sector overall, that isn't enough. it is not just greenpeace that is saying this. some of the big figures in the industry like a google are saying the same thing, that google -- that energy efficiency alone isn't enough. >> nice to see you. thank you very much indeed for joining us. we are going to take a break. for those listening on bloomberg radio, the first word is coming up. for our viewers it is a second hour of "the pulse."

face ofusive interview, the greek economy, face of the greek banking sector. we will talk about that. talking of draghi, everybody seems to want his number right now. we will talk about that as well. ♪

>> near the point of no return. ukraine's president warns of all out war. the frenchdraghi, prime minister and president hollande ahead of draghi's talks. we speak exclusively to the head of piraeus bank. good morning to our viewers in europe, good evening to those in asia, and a very warm welcome to those just waking up in the u.s. happy labor