>> not so stressed out. the ecb said only eight banks need to raise around 6 billion euros. >> consolidation in italy. reelected. brazil's president secures another election in the tightest election in recent memory. ♪ >> good morning. welcome. you are watching "the pulse."

i am guy johnson. >> i am francine lacqua. we are getting breaking news. every anglexploit of the ecb stress test. ceo, thepeak to a greek bank was one of the 25 most stressed banks on the ecb list. >> we will put everything in and he joinsa ceo us for the entire second hour of "the pulse." the numbers worse than expected. median -- 103.he full better to speak to dan han -werner sinn. number and that

is slightly than what the market was expecting. a quick look of how the euro is trading this morning. sometimes it is header to travel than arrive. the euro is higher. beginning tos are roll over a little bit right now. maybe not going to hit for the duration that we had hoped for on the upside. let's stay germany. talking about the numbers. we'll have those. out to frankfurt where hans nichols has the latest. flunked, my5 banks -- maybe slightly too strong, the stress tests. 25 billion euros, the key thing here is that most of that is already being done. >> yeah, they've loved and they had nine months to improve their marks. most of the banks didn't that. there are eight banks left.

they have a shortfall north of 6 billion euros. did that. the banks the grander list of 25, nine in italy and 4 in greece. the challenge is moving forward. what they will do with a supervisory mechanism and it in frankfurt. i posed that question to daniele nouy and she will be in charge of regulation. should that will at the beginning of the process and not the and. >> all of the banks have more work to do. how banks in fact whether they passed or not. we have the information. will let us do a good job in challenging the bank to make sure they are in good shape. >> when you look at what of the criticism of the stress test is

that it did not include were some of the economic outlooks too optimistic? >> i do not think so, frankly. i am not an economist, so i cannot give you a more concise response. , high people who tried to really address the worst possible scenario as they were perceived and when it decided. i believe we have been targeting greece. it has not materialized at all. the situation at the end of 2014 was better. that are elements [indiscernible] all in all, i think we are in good shape. points about what we

learned. despite the fact that officials said the as are english a, you are not saying as a guarantee that lending will increase. , thereerlying concern needs to be more done on the fiscal policy side to stimulate aggregate demand. yes, the bank may be healthier and maybe ready to lend and but unless there is appetite for long, that will not start shipping money out of the door. head of thete biggest shortfall. officials are worried if they can plug the hole. talking to is strategic advice about what their next steps are. officiallyom ecb is through private means, these banks will be able to raise the requisite amount of capital. you look at banca populare di milano, their shortfall is $2.1

billion. i asked daniele nouy directly this question if they could raise this money. she said she was not concerned. what you are saying from bankers , insisting the markets can withstand. there is concern that the overall economy in these countries especially italy and reese may not be growing fast enough to really allow these banks to start lending again even if they are in a healthier position. wasn't this a german number is -- what this german number two is further depress things. >> hans nichols, thank you very much. >> staying on the ecb, we caught up with jerome and he weighed in on the test and said it marks the end of the banking crisis.

>> i think the banking crisis is behind us and i am never free of that banks i filled have to keep on working and strengthening their capital ratios where necessary in the there and not as if it is end of my worries but i think it is a major step to put an end to the crisis and uncertainty surrounding european banking sector. i am sure it will help for investors to return and banks to put out credit again to a real economy. head ofen dusselbloem, the eurogroup. another take a what we do know and do not know and what we did not find out. we are joined on the phone by hans s good morning to youinn. , professor. -- >> we are joined on the phone by hans sinn.

to you, professor. how effective was this process? >> out of 10, 6 or seven. yes, it was a stress test and we did find some of the medic banks and on the other hand, the deflationary scenario which the ecb always sees on the horizon as a danger has not been also in this stress tests. that i find a little problematic. inflation anded northern europe and deflation in southern europe to rebalance and compensate for the extra inflation which your brought to the other countries. families in the southern countries, the ecb should have gotten a scenario and they did not. >> hans-werner sinn, they were

clear and the press conference and one man said it is not deflation, it is not there about cuts he said they do not consider it will happen. is it because of their concern once they talk about deflation the markets will assume they see it or they want more banks to fail >>?-- ecb is the biggest creditor a it is criticizing that is supervising the bank and not tough enough to kill banks, which means that it will have to claims againstwn the banks. it is very difficult to make a judgment. we are muddling through the stress test with a little bit of stress, but certainly not verify --h medic scenarios

problematic scenarios and let's hope banks find a new capital. the v thati manye hundredsw, , --housands have been found view that many hundreds doubt it.found, i >> what we have seen, is it a viable? unit is viable, yes. we do need to the taking unit. whether all of those things that survived the stress test are really viable, i doubt.

i think there's quite a number of additional banks, who will show that have difficulties in the coming years. no one knows that precisely. >> professor, just to follow-up. what was the objective here? was it to improve the credit admission or plays everybody on a level playing field where we could break the link on financial rating and sovereign rating? i am sure it was a bit of both the which do you put the emphasis on? crooks well, the point behind the stress test is one wants to get out of [indiscernible] resolution ismon set up before the banking union, more countries that would have mutual responsibilities further --ks and the problem there

this mutual responsibility would cover losses which originate from previous times one that was not a common supervision. in order to clean up the balance sheets for the new phase, we have this stress test. whether it is the proper claiming, it is another view. does it make across the border a solid action more likely or will we see a round of consolidations in the next couple of months or because not enough banks failed, it will be postponed? -- >> those links banks which do we need equity may look for apartments in other be somes and there will mergers and acquisitions as a result of the stress tests. it will strengthen the banking

europein southern relative to the situation without a stress test. the real problem in southern due tois very large their lack of competitiveness. this problem is neglected. when you read the international press, i find it surprising how little emphasis is placed on this idiosyncratic european problem. the european problem is seen as a general problem of financial crisis. this is not true. warm water in the north and cold water in the south. speaking about the average, it makes very little sense. >> when you talk about

consolidation, is it possible to see a german bank buying some weaker italian banks? >> i have no particular knowledge about such news, but why not? >> ok. professor, a quick couple of comments about the data you put out. the current components and expected components of both fairly weak. is the germany economy in a soggy patch or are we looking at a more serious slowdown? not a recession awkward at the view went of the research institute. -- in the view of the research institute. unfortunately, the indicators givemorning did not optimistic results. both of expectations for the next six months and current situation continue to deteriorate and so a trend which

would've seen since spring has continued. some people have said that the worst is over and now there is a recovery. unfortunately, our data does not confirm this view. >> what is the trend going forward? weaker industrial data would've seen. >> germany does have a construction boom. since the outbreak of the have a since 2010, we do construction boom because what the country and seek safe haven. this construction boo has really brought germanym some growth was from external demand was not there. and the good news among all of these problematic piece of information is the construction boom is still going on.

we are, for example, the two -- and thet information we receive show a further increase. inre are some positive signs the interior of the germany economy pointing to investment demand, but the general picture in manufacturing, anything that has to do with exports is not that favorable. yes, a slight improvement in expectations in exports. but the us is one of the car situation deteriorated. >> professor, we will leave it there. repressor hans-werner sinn -- professor hans-werner sinn out of munich. months must low in october.

>> more on our top story. the ecb stress test. copresident to the of a bank that failed. that is coming up later this hour. ♪

>> welcome back. investors will be closely watching the markets in brazil. to merc have been brutal

catch the markets have been theal to rousseff -- >> markets have been brutal to rousseff in her first term. the first --e in in the smallest margin since the 1940's. we understand she will change the finance minister and that is one thing that people have been calling for. she is talk about dialogue with the opposition. looked like a bleak open to the brazilian market in just over two hours time. petro down more than 5% this morning. etf dow close to 7% this morning. the most since 2011. a lot of indicators that the market could fall by as much as 10%. and there the real, is more weakening of the real

ahead. it could weaken to as much as two points is 5%. 65%.. some say the stock market index could be 56,000 which is up from 52,000 now. not a one-way trajectory. >> what do economists like about what she is doing? >> the good news is on unemployment and one of the reasons why she is so popular. below 5% now. real income has risen 6%. inflation is above the sill 45% ceiling. -- is above the 6.5% ceiling. some of the countries have even higher. him and entered into a recession the year. investment is at a semaphore --

7.5% low. both movies and s&p have said in terms of the credit rating, job is not distant. y's and s&p have set in terms of the credit rating, junk is not distant. >> we spoke to a guest and he the stockrrival won, market would've risen by 10%-15%. >> was a shame for some. >> thank you. the latest on brazil. will contain the conversation on equities and the stress tests. looking forward to that conversation on "the pulse." ♪

has think the exercise shown the entire banking system is strong. and cases that need further work. fabio panetta speaking about the ecb stress test which found nine of the 25 banks failed,

they are italian. >> a check on the markets. jonathan ferro. >> stress test relief versus reality. we opened up 1% higher on the dax. the underperforming equity market this morning. some of the movers, and other stock, banca populare di milano -- banca monte down by 17.5%. the market cap is about double that was elsewhere, a big disappointment, the big movement in fx. lower, six months of declines in german confidence. not pretty at all. pretty at all. thank you very much. >> you are on a roll. after the birth, we will speak

that after the break, we will break,o the -- after the we will speak to the ceo of a bank. >> stay with us. ♪

>> welcome back to "the pulse" live from bloomberg european eadquarters in london. new york governor andrew quomer says travelers returning from west africa will stay in their own homes under a 21-day quarantine. the move has been criticized by the white house, but governor cuomo says he's trying to address the fear and concern of many new yorkers. >> brazil has re-elected its president in the closest election since 1955. she won 52% of the vote, and

brazil remains in recession. investing in brazil is the most in three years overnight on the incumbent victory. in her speech, rousseff said she would like to be a much better president in her second term. >> ukrainian voters have backed pro-european parties in the election. according to an exit poll, the parties of president poroshenko, as well as his prime minister, have taken more than 44% of the vote. poroshenko says he's on course to build a strong pro-european coalition. >> the result of the election brings victory of all democratic, pro-european, pro-ukrainian forces, and there's a lot of opportunities to provide the reform, to present the program of strategy in 2020, where we have steps

for the anti-corruption, steps for the rule of law, steps for the medical reform, steps for he investment climate. >> mr. poroshenko. now, let's return to our top story. as i'm sure you're now well aware, the e.c.b. has posted results of its latest stress test for the eurozone lenders. the central bank failed three out of four greek banks, but taking into account the capital raised this year, that bank no longer has a shortfall. joining us on the phone from athens is the c.e.o. of one bank. good morning to you, sir. >> good morning. >> a lot of effort, a lot of effort. what does this mean for your institution? you put so much into this. does it improve matters? does it just confirm where you are? what does it actually do for your business? >> first i think it marks a new

and positive chapter for piraeus bank and obviously the country. the greek banks have gone through unprecedented scrutiny. this was the third test in a put and this test helps us behind us any questions around the banks. there's been a long and arduous process that started two years ago, and this is the end of this chapter. that allow us to focus on our job, basically supporting greek households and supporting greece to recover and ebuilding the greek economy. >> does this mean you're ready to privatize fully? >> i think it does help people to focus with less concerns about the legacies on the greek balances, and in that sense, it's supported from the privatization process.

i suspect that in the years to come, that will be the order of the day. there's a lot of work to be done for the greek state to be privatized, but i think it's a good start. we're starting from a clean balance with independently assessed issues so that market can make our own judgment. so yes, indeed, it heralds a new era for the privatization f greek banks. >> the last few weeks you've seen much surrounding the greek issues, greek the economy, what's happening with the potential next government, all kinds of things in the air at the moment. do you think that the clean bill of health that you got fully reflects the reality of the scenario in which you're operating?

>> i don't think anyone would assess this is easy, especially for greece, because that test, effectively for greek banks, is stress upon stress. after seeing moderate stresses the last four years, these balances were stressed in a way that issues the greek banks can see the worst of all potential, orse upon worse. on that basis, i think it's very bottoms up and very conservative exercise. now, whether that reflects all potential outcomes, political volatility and so forth, obviously when the assumptions were put together, some of those outcomes were not fair. that applies to european and so forth. but i think that a good amount of the potential sources of volatility are embedded in this stress test. as far as the greek banks are concerned, it's good to know that one of the potential areas of volatility i consider around

the capital is now behind us. the country has a lot to do. it's to clear the air with regards to the new era on this relationship with the european fears and international creditors. it has to do a lot to clear around the political debate. but at least one of the boxes has been in safe position. >> and yet, you seem to be very clear that this draws the line, but there's still a lot to do. can you give us an idea of when -- first of all, whether piraeus will actually take part in the lcro and when you will start, you know, selling abs's. >> look, as a matter of fact, we have maxed out in our eligibility, we saw there's a clear signal from the authorities, and we obviously, we don't shy away from maxing

out. and this will help us provide term funding to greek corporate at competitive rates, which is the end goal of this process. now, we are open for business. as of the beginning of this year, the bank originated to the new greek companies coming out of this adjustment process. a lot has to be done. the message is that they were very, very clear. it's all about credit demand. it's all about supporting the recovery in europe overall, especial am the periphery where the situation is even more difficult. and this is -- this, he can assure you, has been heard cloud and clear. >> do you have a date on when you will start selling to the e.c.b.? >> this is a bit more difficult and more challenge for greek banks, not because of any other reason, but the rating of the

country remains depressed. the good news is it will be reflected in credit ratings. so the amount of abs's we can actually roll into the hands is relatively the at the moment, and we are all, however, working on full speed in order to try and react positively to this facility. this is probably, as soon as we get a chance, we will start adually selling abs's to the e.c.b. in positive response to obviously the section of the monetary policy at the moment. >> on that note, we will leave it. we look forward to hearing all the news that is going to come out on that front. >> thank you very much. thank you. thanks very much. >> from greek banks to italian ones. nine of the 25 banks that failed the stress test were, of course, italian. the largest capital gap of 2.1

billion euros for one bank. let's bring in our finance team leader from milan. great to see you. italy seems to be the problem child. >> that's right. that's certainly what the figures point out. there were nine banks that failed the test, and that's taly's largest bank. they wanted to prepare for these tests, and that's basically the result of a combination of facts that have come together. a have, on the one hand, third recession, and that's . ading to bad loans it's the highest since 1998, and at the same time, the low terest rate environment is constrange banks banks from

returning to capital. >> reading through the italian press, it's who's going to buy it. who's the front runner to pick this business up? >> they face a shortfall of around two billion euros, and it hired advisors as it considered all the options on the table. the chairman was quite clear today in an interview that he said everything is under consideration. credit lyonnais already has businesses in italy and might want to bolster those. santander is also another name that's come up, but this is early days. the results were around yesterday, and we'll be hearing more over the course of the next two weeks, by which time ey have to present a plan to the regulators to fill that

gap. >> well, italy is a market that has been deemed to be over with too many banks, and therefore, to be, an effort by the regulators and by draghi to boost consolidation. whether that's cross border or national, it's too early to tell. >> elissa, thank you so much, our finance team leader from milan. >> coming up -- ukraine votes for a pro-e.u. parliament, but what are the challenges the new government will face? we'll give you the latest on the situation in ukraine after the break. ♪

>> ukrainian voters have backed pro-european parties in the country's parliamentary elections. according to an exit poll by ukrainian research institutes, the parties of president poroshenko, as well as his prime ministers have taken more than 44% of the vote. our ryan chilcote jones us now. what's different about these elections and what has russia's reaction been so far? >> in a broad sense, it's a changing of the guard, right? e politicians that were in power in the parliament under president yanukovych are now

out, and the more pro-e.u. politicians are in. what i think is really striking is the prime minister actually got more than the president's party. this is a guy who, when he came into power in march on the back of the street revolution, on the back of the mind, he was going to be the least powerful, the least popular politician in ukrainian history, because he was about to implement the i.m.f. reforms in exchange for the $17 billion. and in fact, actually, voters seemed to have taken a kinder view of him. the interesting thing is one party is joining the mix is the self-reliance party. they've never been in the parliament. between the president and the prime minister who are allies, and this new party, they're going to have a very confirm control over this parliament and should be able to introduce reform. the other thing that i think is interesting is some of the radical parties that were really sort of anti-russian are

not in the mix. having said that, though, there's a lot of concern, like the ruble is down this morning. part of the concern is this is more of a pro-e.u. parliament, bolstering the government's pro-e.u. view, which sets them up for even more of a clash with russia going forward, which is obviously something to watch. >> what are the big challenges? >> the economy, right? the i.m.f. is set to fall by 10% this year, making it europe's worst performing economy. next year doesn't look great either. in addition to that, they're the worst performing currency, down 37% alone this year. and then you've got the issue of gas. they don't have enough of it. they're going to talk to the russians about getting more on wednesday. the result of this election should be a positive for gas, but that's definitely one to watch, because obviously particularly if it gets very

cold, that's going to become a bigger issue. like you said, ultimately this i about finding some way to, guess, appease or satisfy the russian president so that they can go forward, because if there's no peace in the east of the country, then obviously here's going to be no economy. >> thank you very much. ryan with the latest. >> no ven advertise is selling ts flu vaccine business to the australian vaccine maker. they say the deal will create the world's second biggest player in the $4 billion global flu vaccine market. the agreement is pending regulatory approval, but is expected to close in the second half of 2015. >> staying with pharma. directors are said to be meeting today to discuss replacing the chief executive. according to people familiar with the matter, relations between sanofi's board have been strained over the attempt

to sell an $8 billion drug portfolio. >> vodafone says it has begun an audit. vodafone forced the spanish cable operator in july for the $9 billion. the probe has to do with value-added tax declarations. vodafone is also reportedly withholding bonuses for three new managers tied to the acquisition. >> coming up -- they win for sustainability. the cosmetics giant takes home a prize for its efforts. after the break, we'll speak about going green.

>> welcome back to "the pulse" live on bloomberg television and radio, also streaming on your tablet, your phone, and bloomberg.com. >> ok, time to say new energy. >> l'oreal has received the prize for sustainability. the company's efforts in reducing emissions and

encouraging sustainable energy use has helped them gain recognition as a carbon-conscious corporation. joining us for more from paris is l'oreal's chief sustainability officer. great to have you on the program. thank you so much for joining us. first of all, just give us a sense of what this means concretely. does it mean that your new products will be much more sustainable, new energy-friendly, and that you'll reduce carbon emissions? >> good morning. thank you for having me. yes, this prize received received on two elements, as you know, first on transparency in reporting on our car bob emissions and the way they encourage all our ecosystem lso to join us in this effort, so we encourage them to join the approach. and then on the performance aspect, and we achieved -- we committed to reduce by minus

% from 2005 based on our emissions, and until 2015, and actually we will achieve this oal. we are roughly 15% at the beginning of 2015, and we are quite happy about the performance >> you were giving some of the figures there, your report gives the goals of 2020, and one of the things that caught my eye is you want to reduce your environmental footprint by 60%, whilst bringing beauty to one million new customers. do you think there's an appetite for more sustainability from the consumers, or is it just l'oreal taking it on board as something that you need to do or the future of our children? >> well, it's both. we have done consumer studies all around the world. in mature markets, and what we can see is that everywhere, all around the world, consumers to

want buy products from a company that is more responsible, that is a good company. what we also see is when the consumer goes and buys a product, unfortunately it's not yet taking it into consideration. so for the moment, from the consumer side, there is a gap between what they think they should do and what they do in the moment of the buying it. but this gap is going to melt down, and very soon consumers are going act as they think they should, taking into account responsibility and sustainability. l'oreal, our c.e.o. is convinced that also from an economic deprashe a value point of view, this is really the future of l'oreal and the future of all companies. >> but give me a sense, it's interesting what you say. it hasn't really entered, you know, in the consumer's minds. what will it take for it to

enter? when i buy a new l'oreal product, why would i choose one instead of the other? is it all about marketing? >> sustainability was not basically very beautiful. very long-time green products were either more expensive, less beautiful, less inspirational, less glamorous. so we think there is a challenge to say to consumers, you can have the best performing product for the best price, but also the most responsible program. our challenge is to bring all thesements in together for the encourage order to the consumer to make sustainable lifestyle choices. >> thank you so much. l'oreal's chief sustainability officer, with us from paris this morning. >> ok, bloomberg "the first

word" is up next. it's a second hour of "the pulse." here's what we're talking about. we have that conversation as well. plus we're going to be talking algebris bank. plus the c.e.o. of the national bank of greece will be with us as well. you can probably guess we're going to be spending an awful lot of time talking about the stress test. we're looking forward to the conversation. we hope you'll join in. join us on twitter. i'm @guyjohnsontv. >> >> @flacqua. we'll be talking about consolidation and what role eye yal tan banks have to play in all of this. there's a theme running through this, right? >> italian. >> italians not doing so great this morning. we'll get their take on it, because this may be a turning point to say, look, we start from a level playing field and

consolidate and see what happens next. >> plus eye yal tan banks limit down this morning. they're under pressure. we'll talk about that as well. see you in a moment. ♪

>> with international elections, monday morning brings a pro-europe ukraine business as usual in brazil. italy is most stressed as

europe tests banks. we speak to former e.c.b. president jean-claude trichet. and i quit. we consider the quit rate. good morning, everyone. this is "bloomberg surveillance." we're live from our world headquarters in new york. it is monday, october 27. i'm tom keene. joining me is scarlet fu and brendan greeley. right now let's get to our top headlines. here is scarlet fu. >> in brazil, the president promising great changes after winning a second term. she was re-elected with 52% of the vote, defeating the opposition candidate. rousseff says the challenge of pulling the country out of recession and slowing down inflation that is above the central bank's target. investors are skeptical. brazil's stock fell 7% last week on speculation she would be re-elected. in ukraine, they easily defe