guy: details from draghi. the ecb president set to finalize the bond buying program. francine: another investigation at the the oe. prosecutors probe liquidity operations conducted during the financial crisis. all this as governor carnies delivers the interest rate decision at noon. guy: china downgrades growth. the premier sets the target at around 11%, the lowest level in more than 15 years. good morning. you are watching "the pulse."

i'm guy johnson. francine: i'm francine lacqua. we are getting breaking news out of italy. fourth quarter gdp figures, flat. down some 0.5% year on year. guy: not exactly the rosy outlook you would hope for, certainly not the progress you would have hoped for if you were mario draghi. let's shift years and talk about what the central bank is going to do today. the recipient -- the european central bank goes on tour once and a while and it is on cyprus today. francine: the ecb will talk about it bond buying program, how it deals with greece. jonathan ferro is in cyprus for the meeting. john, over to you. >> thank you very much, francine. that is the big focus today. you've seen the markets react. what does it mean for the real

economy and what does it mean for countries on the periphery of europe like cyprus eston mark joining me now is the former cypriot president, amanda took cyprus into the european union. great to have you with us this morning. i've had a couple of people say the conversation those guys are having behind us will make no difference to cyprus. what do you think? >> unfortunately not because neither cyprus nor greece will benefit from quantitative easing for the time being. jonathan: you can't buy debt for now. >> because unfortunately, our parliament has been delaying the foreclosures. jonathan: what is your message to the government? why is it taking so long? >> it is not the cypriot government to blame. it is the way parliament is behaving. in my opinion, they are playing games. at the end of the day, they will approve, but in the meantime,

cyprus is paying the price. jonathan: you are also heavily exposed to russia. talk to me about relations with russia. the sanctions makes it very difficult. a lot of tourism from russia is not coming anymore. >> to start with, there is no real question of exposure to russia in that sense. cyprus and russia always had friendly relations and i think that's one of the characteristics of cyprus, friendly relations with all countries because we are a small country. cyprus -- russian tourists were coming to cyprus for many reasons. you see the weather, how nice it is. secondly, the fact that cyprus is an orthodox country has made people feel more comfortable. but the crisis in russia, the crisis of the ruble and so on is affecting. i'm afraid that the number of

tourists that come to cyprus this year will be smaller than before. jonathan: in terms of foreign policy, things are tense. cyprus is finding itself in the middle of that. you see the current president talking to putin. .wait a minute -- >> wait a minute. this thing about the ports of cyprus, there is nothing to worry about. what they are providing is humanitarian facilities. they are the same for everyone. cyprus cannot afford to have been relations with russia but cyprus is a member of the european union and has to follow that policy. jonathan: do you think there can be a bridge between the european union via cyprus towards russia? >> i would be very happy to see that happening but i'm afraid that would be a very small bridge. jonathan: what is the biggest headache right now?

is it the fragile agreement between grace, or the sanctions? >> wait a minute. we are not exposed to grace. jonathan: economically, you are. >> we are not. we used to be, but since the eurogroup decision which cost cyprus a hell of a lot of money , which i think was an unfair decision, but it was there. there is no exposure to the greek market. what there is is a lot of cypriot businessman interested in buying grace, but this is not serious for the cyprus economy. you asked about whether cyprus can really pray a role. it cannot. we are too small to play a role. but we ought to be friendly with everybody. between us coming to the russian problem, i don't think we will solve the problem with sanctions.

it has to be a diplomatic solution. jonathan: going back to greece, why do you think it was unfair? >> what was unfair was what happened to cyprus. for the first time in the history of the european union, they decided to pay -- that it would be the depositor that would pay. in no other country has that ever happened. that was very unfair. they know now that it was unfair. you cannot be unfair to france or italy. jonathan: also the first country in the eurozone to have capital controls. some people say it is a second great membership of the eurozone. for you, is it better to be in that out? >> come on. is it better to live or to die? cyprus and all the european countries --

jonathan: what about the eurozone? >> the eurozone is the future of the european union. it was a great idea. we have to get together. otherwise, there will be a third world war. at the same time, they made the mistake of thinking that we start with a little bit and then it comes to others. that is the trouble. the nations got the advantage of being in the european union but they continue behaving as if they were not in the european union. as you know, in reality, you cannot have it like that. you have to give up part of your national independence if you want the european union to be functioning. jonathan: the governing council press conference in the ecb will

probably be dominated with questions about greece. you say to live or die. is that the same message to greece? >> of course. you see when prime minister tsipras came back, he said we won a victory. we made in the eurozone and in the eurogroup. that is the best proof that that is the desire of greece. of course, to implement it will take a lot of effort. you cannot please everybody. jonathan: george, we've got to leave it there. the former president of cyprus joining us live. you can't make everyone happy. i'll leave you guys with that. francine: thank you. smaller countries feel like they have been treated not fairly by the eurozone but like we heard from the former president of cyprus, a lot of them don't have a choice. guy: when you are that small

you have to play by those rules. stay with us. we will bring you the ecb news conference life and in full. it all starts at 1:30 u.k. time. francine: let's get euro-dollar of for you. there you go 1.1045. guy: amazing. the impact of qe, some would argue, already priced in. the fact that the policy is going to be put into place already manifesting itself in the market. you can see that in the shape of the curves. look at what you are seeing. francine: if you look at the duration, the spread between the spanish and german five-year narrowed to 59 basis points. that is the tightest since 2010. we had a similar spread last week on the 10-year italian and

german. guy: it tells you that the pricing of credit risk is maybe a little difficult at the moment. these are meant to the risk-free, but as we all know that could change. francine: it can change very quickly. that brings us to today's twitter question. can draghi save the euro project? that is our twitter question of the day. we will round of some of the answers later in the program. guy: coming up, the bank of england faces a probe. we will bring you the details of that, plus we have an exclusive interview with qatar airways ceo . words about the airlines subsidy viewed with delta. those comments coming up here on bloomberg. ♪

francine: welcome back to "the pulse." we are live from bloomberg tv and radio. guy: the euro sliding to an 11-year low. at the bank of england, the mpc meets. interest rate at 0.5%. let's get some analysis on all of this. we are joined by jpmorgan's asset management strategist for the u.k. and europe. good morning, stephanie.

let's talk about the ecb. details from draghi today on the qe program. when you talk to people, any sense that most of this is priced in? >> some of the debate about how long you are going to see an effect on yields when you've already seen interest rates fall quite a lot even before the announcement of quantitative easing and since then, so how much more can you get? in the short term, there is more of a practical concern. you've seen prices go so high and yields go so low that you aren't going to want to sell to the european central bank when the expectation is that yields might carry on going lower. there will be some interest about the technical details how they are going to go forward with these processes -- these purchases. they said they will do it according to the t. we don't quite know how they are going to manage that. are they going to pay any price

for these bonds? that will be interesting to hear. francine: stephanie, you are absolutely right. there might not be enough people willing to give back these bonds. you were saying that yields are so low it seems we don't really price the risk in. but we still have huge political risks in the eurozone. guest: i think that's the dynamic for this year. if you look at the economics, even if you think there are some long-term difficult problems for the eurozone, and any economist would say they have a hard road to walk, but relative to a year ago, they're of some big positives and quantitative easing is one of them. you also have credit demand picking up. you have a bit less budget austerity. the politics are still a question mark. can the politics get well fast enough? the politics may be still deteriorating in some countries.

greece is a symbol of that. guy: one of the ways to get the on economics to improve would be to get credit into the real economy. i wonder about the effect of qe thus far. it seems to be going down the currency channel rather than manifesting itself in the banking channel by which most of europe gets its credit. guest: this is part of the problem. although the ecb might find it can still be effective, it is white late -- quite late. other central banks were able to act when the price was higher. we have our doubts about whether quantitative easing is going to be transforming. they are very reliant on the currency relative to the federal reserve or the bank of england. even in the u.k., there were doubts about the banking channel. i think banks are so important for the funding of the european real economy.

particularly for small and medium-sized companies. you have seen some improvement in the funding situation and a bit of a pickup in demand. that's what tells you the most important thing, that people are more confident in the european economy. there's more confidence in some countries. still maybe not so much confidence in france and italy. that's the big driver. quantitative easing can help and i think it has picked a good time. you've probably got some forward momentum, but it can't be the only thing. francine: sometimes it works at the beginning and stops working as much so you end of extending the balance sheet for not that much. let's move on to the boe. you have this huge movement from the ecb. the rest of the world 12 major central banks, 20 major central banks in all, are easing. will the boe really be able to raise interest rates this year? guest: i think it has become

more difficult to hang on to that view. i think the federal reserve will raise interest rates unless something significant happens in europe or they see something significant in the u.s. economy. it is slightly different for the u.k.. i think it has become harder to say they are going to be around the same time as the fed. it is interesting, if you listen to the conversations, the speeches of senior members of the bank of england, mark carney, other members, they've been quite clear. they've been trying almost as hard as janet yellen in the u.s. to keep that option open of raising rates sooner than the market expects. we've almost got to the point where we are saying, rates are never going up in the u.k. if you look at the strength of the u.k. economy, that is a hard case to sustain. i think we may end of thinking that we pushed it out too far. guy: how do you think the rate

trajectory works in their mind? do you think it is, people are in a position where they understand rates can go up and don't spend so much on credit or do you think it is a fairly sequential series of rate hikes? guest: i think the most important trade-off that both the u.s. and u.k. central banks face is about how quickly they go now and what does that by them in terms of how gradually they can raise rates after that? i think all would say, if they could they would prefer to get a rate rise this year. in the u.s.'s case, by the summer or autumn. they would feel that that bought them the capacity to go more slowly. also, the long-term prognosis is not whether this happens in june or september. the issue is, it has been such a long time, especially in the case of the u.s.

if you shocked people or surprised people and caused a lot of instability, cap you really won that credibility? the belief of many in the markets is they have to move faster. francine: stephanie, if you look at the strength of the fed, the power it has, the u.k. would be foolish to act before. they are countering qe across the world and it would be quite dangerous for the boe to be the first one to raise rates in this environment. guest: i was one of those who thought before the oil price fell that may the u.k. would go first. i thought it was quite a narrow call. it is getting harder to sustain that for the reasons you say and because oil prices are having such a dramatic affect in the u.k.. you are right in a sense.

it would be difficult for them to go it alone. but you never know. there's also a sense that the federal reserve -- it is so momentous when they raise rates, to have somebody else test the water, but i agree, it is much harder now. i would be very surprised now if the u.k. raised rates before the u.s. guy: i was looking at a morgan stanley survey which calculates how far out the next rate rise is going to be. i think it is 10 months now, the first rate hike from the u.k. do you think that is right? guest: i think if the economy proceeds as we think, short-term stability around the election that feels a bit far away to me. i don't see why you wouldn't have enough pickup in the real economy, enough of a boost from cheap oil and enough of an increase in wages, to have been moved before that. we keep on pushing it into the future.

they haven't been wrong yet. francine: one of our other top stories today, investigating liquidity options at the boe during the financial crisis. the general mood in the u.k. is there are a lot of investigations going on. it seems that is different from other countries because we are taking it so seriously. what does it mean for investors? guest: a lot of people in the public are upset about bankers not going to prison. this is a slightly different thing. there is a concern about the bank of england not having enough internal constraint. mark carney has said there needs to be much tougher approach inside the bank of england. they were a bit old-fashioned maybe in the way they dotted their i's and crossed their t's. there was a lot of action taken in the financial crisis which they want to explore now. there is some sympathy for them.

francine: that's a very fair. stephanie, thank you very much. francine: ok -- guy: ok, we have both the ecb and boe rate decisions later in the show. we will be taking the news conference from mario draghi life and in full. we will take a break. ♪

francine: welcome back to "the pulse."

guy: now, here are bloomberg's top headlines. a warning that this first story contains graphic images. francine: the u.s. ambassador to south korea is recovering after being attacked with a knife by a north korea sympathizer. the ambassador suffered a wound to his face. his injuries are not life-threatening. his assailant has been identified as a south korean who had been previously convicted. guy: russia is accusing the united states of plotting to oust vladimir putin by financing opposition groups and encouraging mass demonstrations. russian security council says the u.s. is funding political groups under the guise of promoting civil societies. francine: as the u.k. general election draws near, debate continues. prime minister david cameron has said he will only take part in one televised debate. he has agreed to one appearance

with all seven party leaders. broadcasters has proposed three debates. we're going to take a break. back in two minutes. ♪

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francine: welcome back to "the pulse" live from bloomberg's european headquarters in london. guy: china has lowered its growth target. the country's premier set out an economic growth target of around 7%. that is down from 7.5% last year and is the lowest level in 15 years. francine: roz, what was the message from the leadership? >> well, if you listen to what li keqiang has said, our

capacity is an efficient, overcapacity is a problem, and the foundation is week. it sounds like doom and gloom. really, this 7% figure, many economists think is a realistic figure for china to aim for. the economy has been slow. the government has been worried. there was a rate cut just a few days ago. the government is worried about how the economy is doing, but this goal of 7% will give the policymakers aim to pursue growth, while also pursuing long-term goals which are important for china, such as reform. this is what li had to say this morning at the mvc. >> we need to maintain policy continuity while moving forward with reform and structural adjustment. we need to develop twin engines

to drive development. popular entrepreneurship and innovation paired with increased supplies of public goods and services. this will ensure that growth in quantity is underpinned by growth in quality. >> li keqiang saying that the quality of growth is very important as well, no longer chasing quantity. this afternoon, we heard from the national development and reform commission also a very important body. they basically said that this 7% target is in line with china's five-year plan and china has fundamentally strong economic growth and the fundamentals are good and this about 7% target is going to reflect the new normal for the country. guy: let's talk a little about pollution.

the government putting forward some ideas of how to deal with it. what do we hear? >> pollution, always a big issue as you can see behind me. it is quite hazy today. there always seems to be some kind of pollution hanging around in the air. it is much talked about. it is a concern for policymakers. they have been trying to clear the skies, but they said today that they want to try to promote zero use of coal in some areas or to cut down the use of coal in other areas. also, pushing the use of new energy vehicles for example by building more charging stations for things like electric vehicles. these sorts of things can make a difference. the country as a whole needs to clean up its act. when it comes to the mpc governor, the skies seemed to

clear up a little bit while the delegates were in town. one of the last things the governor said they are not letting up on his corruption. it will continue to pursue its campaign against hedonism. francine: thank you very much. guy: let's turn our attention closer to home. all eyes on president draghi today. the european central bank mates. investors are waiting for more details on how the qe program will work. let's go to nicosia where jonathan ferro is standing by. what are the details we need to hear about? >> we've got a plan. for one, you've actually announced qe. that is done and dusted. as always, it is a slow process to tease out the details. what are you going to buy? how negative are you willing to tolerate yields? and what is your appetite?

if you haven't got appetite for debt with a negative yield in europe, there isn't much of it outside of that. one third of euro sovereign debt carries a negative yield. there will be a discussion about risk. yanis varoufakis is on the record talking about how it may have been a mistake that the ecb bought greek debt. once the ecb holds your debt that will not be restructured. if the ecb wants to buy sovereign debt with a maturity of 30 years, from italy come i can you be sure that over the next 30 years, italy won't need to restructure their debt? what is it to italy if the ecb starts buying their bonds? i imagine it will be debated at this press conference. francine: and i guess he will be fielding a lot of questions not only on the bonds related to greece, but on whether greece needs a third bailout after the finance ministers elsewhere in

europe say they will need it. >> and some pretty big bond redemptions for the ecb. when this four-month extension ends in june, you've got a big redemption in july, another big one in august. how is it going to be paid? no one really knows. big picture, when the ecb delivers those forecasts for inflation that could go all the way out to 2017, you've got your one trillion euro bond buying plan. you still forecast inflation to come in well below 2%. do you have to do more? it is the bizarre nature of the discussion. we are asking whether there's enough bonds that i, and we are having this bizarre discussion about when they will be tapering. this news conference is going to get technical at times. i think it could get bizarre at times as well. francine: it does get bizarre. the expression on mario draghi's

face is priceless. jonathan ferro in nicosia. guy: jon ferro in the sun. it is freezing cold here. looks like a nice place to be today. we will bring you that discussion live. that is at 1:30 u.k. time. looking forward to hearing what mario draghi has to say. francine: now on to the boe. an investigation into some of the bank's actions during financial crisis. jen ryan, thank you for coming on. what is this investigation? >> they are looking at some actions the boe talk to provide emergency liquidity to the banking system in the wake of the panic and northern rock. there were other measures the bank took later on in 2008, but that's what the investigation is focused on. guy: pretty crazy time. is there some latitude for the

fact that we were dealing with one of the worst financial crises in history? it is easy to look back with hindsight and say, you shouldn't have done this. how much latitude do you think there will be in the system for that? >> i don't know. on one hand, you've got to see what kind of controls were in place. this is something mark carney was addressing when he spoke to parliament. that's something that has been on the minds of parliament, on the lines of the bank of england, but like you say, there was actually a great many unprecedented measures that the bank took and we are still dealing with one of them quantitative easing. francine: we had positive pmi figures this week, we had some labor market signs that are better than markets were expecting, so what is the argument for keeping interest rates low? >> one thing is the fact that inflation is so low.

with inflation so far below the target, policymakers want to be very careful that inflation expectations don't get dislodged. the other thing is the general election coming up. if you don't know what the polls tell you if you don't know what kind of government you are going to get, if there will be another election in the year, maybe there is an argument for keeping rates on hold. guy: how much does the environment play into it as well? the fed is talking about raising rates, but how much does the fact that in some ways this is a zero-sum game, sterling will be one of the pressure valves how much does that play into the thinking? >> you make the point that the fed is looking at tightening policy. you think of the u.k. as being caught between the euro and the u.s. if the fed moves, what kind of a position does that leave the boe? we've got to see what happens to the pound and the domestic issues such as wage pressures.

francine: what does it mean for when the boe will raise rates? is it going to be this year? >> it could be this year. that is what economists say in the bloomberg forecast. there's an idea that once the election is passed you've got the ecb starting qe and that will help kickstart that economy. if you've got wages picking up in the u.k., that's going to pave the way to start their own tightening cycle. francine: jennifer ryan from bloomberg news covering the boe. guy: coming up, we speak to the ceo of africa's biggest bank. find out what drove its profitable 2014 and why standard sees headwinds in the coming year. ♪

francine: welcome back to "the pulse" live from bloomberg's london headquarters. guy: standard bank, africa's largest lender, saw an increase in profits last year. the bank has warned of structural and cyclical headwinds in south africa. joining us now with more on those results is standard thanks ceo, then grigor -- standard bank's ceo, ben kruger. where did the pickup come from? >> for us, we have had very good growth in nigeria as well as

angola. our highest growth areas have been in east africa. uganda tanzania, those have been strong areas of growth for us. and then pretty good growth, well above 20% in countries like zambia mozambique etc., all showing positive growth. francine: are you expanding in any new countries or do you want to beef up your operations in countries where you are already present? >> we definitely think we are below scale in countries. for us, the core market that we think we should increase will be countries like nigeria, ghana, angola, kenya, mozambique. we have a focus on trying to increase our scale in that. we have a representative process in ethiopia. the banking industry there is foreclosed to foreign banks.

we think being underground will prepare us, or when it does open hopefully in the next year or two. we would hope to expand in the west african region as well over the next year or two. guy: on number of european and global banks are being forced to offload assets at this stage. some people are being forced -- some people are hoping to take advantage of that. do you think this presents an opportunity? >> we've been clearly one of the participants in that. we've disposed of banks in russia, argentina, brazil, etc. recently, we concluded a transaction where we sold a controlling interest in our london-based ranking business. that allows us to really focus on africa. we are constantly on the lookout for any opportunities in africa.

i think we have reached a stage where we have sufficient scale and infrastructure where we can grow organically. it is an opportunity to grow through m&a. we would always be changing to that possibility. francine: it means that you don't think you have noncore assets left to sell? >> no, i think we've pretty much completed. our last transaction in january this year was the final disposal of non-core assets. we think we've now entered a new phase which is focused solely on growth on the african continent. guy: ben, the government in pretoria is protecting -- predicting 2% growth this year. do you think that is optimistic? i have dollar-rand, trade

balance at a record low. how grim is the story in south africa? >> it is a mixed bag, to be quite honest. growth in africa is impacted by the energy situation here with the electricity utilities trying to curve with demand. africa has been a tradition of the energy demanding economy and it is trying to move toward more services than it has been. this transition has been particularly complicated, given the complexities in increasing the capacity which is running about four years behind schedule on the big power plants. we are seeing some electricity coming to the grid from renewables. the power stations started producing earlier this week. clearly energy is a major concern to the economy. we think that is negative by

1.5% in the economy. if the price of oil remains where it is, we think the price of oil is positive to the economy. while this sounds like a balancing situation, even at 3% growth, that is not sufficient for a country with such high levels of unemployment. we really need to grow at 4%, 4.5%. guy: do you think we will even make 2% this year? >> i do. guy: ok. francine: give us a sense -- go ahead, finish your thought. >> i was just going to say, you might be reminded that we've had all the labor disruptions in the first half of last year. when i say i think we will make 2%, it is predicated on the premise that we won't have major labor disruption in the near future. francine: i was going to ask you

about central-bank action around the world and the pressure that it puts on your country. as we go into more and more qe from around the world, we are in more and more uncharted territory. >> i think it is such a complicated territory for europe and everyone else in the world. whether you are starting to er exiting qe, that is complicated. when you extrapolate that to the emerging economies, it is quite significant. i think that is going to be huge. it is really important for us to attract sufficient capital into the country in the near term. the government needs to remain very focused and vigilant on how we position ourselves as a country and how open we remain for foreign investment in our country as well as raising of

capital and finance for many of these large-scale projects which will allow the economy to structurally reposition to grow at a much higher rate. francine: thank you so much, then kruger. guy: coming up, an exclusive interview with the qatar airways ceo. he has some fighting words about his airline's subsidy feuds with delta. stay tuned for those comments. he's always got something to say. ♪

francine: welcome back. now to the continuing war of words between delta and qatar airways. they have traded accusations last month over the government aid received by qatar airways and the other gulf carriers. guy: delta and other u.s. airlines argue that the state aid allows gulf airlines to undercut competitors on fares. they are seeking the u.s. government's help and will make their arguments public in a media briefing this afternoon. bloomberg has been speaking with akbar al baker. yesterday, an interview happened and he showed no sign of backing down. >> i do not have the insight into the report. i would like very much to have an insight so that we have the opportunity to defend on all the

slender that it may contain -- the slander it may contain. if you accuse somebody, you should give him the details. >> slander, that is a strong word from you. we basically know the charge that you get subsidies that aren't fair. >> exactly. i think mr. anderson doesn't know the difference between subsidy or equity that my government puts into the airline for us as a business. guy: bloomberg has reached out to delta for a response to mr. al baker's comments and we have yet to receive any statement from them. francine: hans nichols joins us now. he also spoke to the emirates president and that interview is coming up. what did he say? hans: mr. clark wants to see

what is in the copy of this report. that is one thing he said is grossly unfair. they released this report to select u.s. agencies and the gulf state carriers haven't had an opportunity to respond. he said it was bluster and flim flam. their strategy from emirates they are going to see just about anyone they can to press their case. members of congress administration officials. we know that the u.s. carriers are pressing their case on capitol hill. they are going to unveil that report later today in the states. here is one interesting side note. emirates, qatar, and etihad will only have two weeks to look at this report. he was suggesting that wasn't enough to formulate a robust response. we will have the full interview

in the next couple of minutes. this isn't just mr. al baker. this is also tim clark. i suspect all of the gulf state carriers are going to be trying to mount a defense. guy: it is really interesting. you are in a situation where tim clark and mr. al baker are both big buyers of boeing airplanes. that is a huge benefit to the u.s. economy. makes you wonder how the u.s. authorities are going to do this one. looking forward to hearing those comments. francine: i'm really looking forward to that as well. for those listening on bloomberg radio, the first word is up next. for our viewers, a second hour of "the pulse" is coming up. it is all about the ecb and the the oe. guy: a former member of the committee here. francine: and of course, when it comes to the twitter question of the day, that's what we will be looking at. is the ecb and mario draghi can

they save the euro project? you can tweet us. that's where you find us. guy: we will be back in a couple minutes. ♪

francine: details from draghi. the ecb will finalize the bond buying program. guy: you can't prosecutors probing the central bank's liquidity operations. as the mpc delivers the interest rate decision at noon. francine: china downgrades growth. 7% the lowest in more than 15 years. guy: good morning to our viewers in europe, good evening those in asia

and a very warm welcome to those just waking up in the u.s. i'm guy johnson. francine: i'm francine lacqua. this is "the pulse," live from london. guy: in cyprus all eyes on draghi. investors waiting for more details on the qe program. jonathan ferro is in nicosia. what about the details? jonathan: we want to know what you are going to buy, what is your appetite for debt with a negative yield. it is done, 60 billion euros a month. the discussion goes forward as to whether this is going to work. fine yields are already at record lows, bund yields, spain italy etc. in places like cyprus, greece places where the ecb will not be

conducting qe what doesn't mean? i caught up with the biggest lender in cyprus. the ceo of the bank of cyprus. >> if the world and the economies of europe are over barlett we have to find new ways of doing things. we have to go for extended tenures on mortgage. we look at sweden as an example. doing the same things faster or doing more of the same things is not yet printing to be resolving this crisis. these guys need to think out of the box. jonathan: doing more of the same. not only did it take five or six years to execute qe in europe, more of the same. it inflates asset prices. what is the spillover? we had a conversation about what the transmission mechanism is for this program.

is it about think lending via bond yields or is it about the foreign exchange rate and the rate of the euro hitting a low? it will be a big debate about the effectiveness of qe beyond will they, when they. francine: jonathan ferro in nicosia. stay with us for more from nicosia. we will bring you the ecb news conference at 1:30 u.k. time. guy: can draghi save the euro project? they see keeping the show on the road? let us know what you think. the bank of england out with its rate decision, no change expected for the record low member that has been in place for six years this week. as the fed mulls a rate increase what course should be boe take. francine: an exclusive interview

with deanne julius. thank you for being here. when you look at central-bank action around the world and the place that the boe has and that just when the ecb this starting qe how difficult is it to raise rates? ms. julius: it is difficult because of where our inflation rate is. the boed is charged with targeting the headline inflation rate. when it is as low as it is 0.3% a rate increase would not be understood by most people. even though you could justify it, it would be a difficult communication. guy: the flipside would be when inflation was out 5% they did not aggressively hike rates. ms. julius: they were implicitly looking ahead and looking at the core rate. our core rate is about 1.4%.

they could make that case but the two members of the mpc voting for a rate increase a couple months ago have backed off and said it is not quite time. it would be a shock to the market if they raised rates today. francine: it would be a shot. do you think they will be able to raise rates this year? ms. julius: depending how the data goes. if inflation does start to pick up, core inflation, they know the basics effects will take and in july when oil prices will have dropped on at the base . they could find themselves under pressure. they will look at what the fed does. if the u.s. decides it's time to raise rates that will take the exchange rate pressure off the pound. guy: how much political

consideration is there? it is meant to be an independent central bank but it must take account the political landscape and the uncertainty. ms. julius: they are probably glad there's not pressure to raise rates before the election. i don't think the political pressure is there. i never felt it. i think the current coalition is careful. guy: but the lack of certainty. there could be a long lag effect as we do not understand how government is going to be formed. do you think the uncertainty, a bit like the scottish situation will play a part? ms. julius: when one element of society is going to change other elements need to maintain stability. between now and may the economy is unlikely to change so much that it will be a material thing. francine: some investors have

come on the program saying the boe won't have the guts to do anything before the fed raises rates. does that seem sensible? ms. julius: the fed's movement will be a consideration. if it looks like the labor market was getting tighter and wage rates started to go up and there was pressure for wages to go, some underlying things the boe looks at in the labor market, those signals would change. at that point that would be more important than what the fed does. guy: what -- why with a raise rates? what are they trying to achieve by raising rates? ms. julius -- ms. julius: they're trying to stick to the inflation target. that is a long way to look ahead.

especially when the international financial market is in an odd situation. there forecasts have not been very reliable. there is a little bit of -- guy: predictably unreliable. ms. julius: each member has got to do a judgment call. guy: the bank now has additional tools with the macro prudential tools it can use. if they raise rates, its it a signal they are not quite as effective? can they control other elements of the economy with the macro pru rules? ms. julius: the tools of the fpc are about the structure of bank lending. that has never been something the mpc has been worried out. that was the problem, it was getting out of hand. guy: is it getting out of hand again? ms. julius: i don't think so.

the concern is more what will be the effect of the liquidity ratio rules. if the banks are being held back not just by the demand in the economy but by regulatory tools that have been applied and are threatening to apply, that is a dampening. it would be nice if there was coordination. francine: what is your take on the european central bank? they are starting qe we are not sure it is going to work because it is priced in. where does it leave them? ms. julius: it is working through the currency channel. that is the only channel i expect qe to work through. because of anticipation, the euro has gone down 11% or something against the dollar. it is having an effect there. what i worry about is the modalities of qe which we will find out more about today.

what are they going to be buying? it is going to be selling? european banks holding a lot of that debt. they need to end the liquidity ratio -- they need to for liquidity ratio reasons. what do that -- what do they buy? gilt or treasuries. there will be a rotation in the bond market. guy: d fingers a desire to see asset prices go up? in the united states that existed. do you think in europe it has the same impact? if it doesn't, does not dampen the effectiveness of qe? ms. julius: i know the equations show that the wealth effect is not as big in europe. maybe because people in their retirement portfolios are making decisions.

it's probably not as effective but it is still pretty effective. when you read what the people in the investment community are saying they are getting worried this is a bubble in the stock markets in particular. many of them are hitting highs. offset by what is happening and currencies. you got to take the declining euro into account. there's a general nervousness we are in a period of a false market and the bond market because of central bank behavior. it is difficult to predict what is going on. francine: we speak to market participants who do not seem to see the risk. of coarse stocks are going up what else am i buying? is that going to come to a head? when will it burst? ms. julius: it could burst for a number of reasons. could be the uncertainty of when the fed and others will start

raising rates. that could be a trigger. we are on a trajectory to normality, let's get ahead of the curve and restructure the portfolio now. it could be because of geopolitical problems. we do have the russian-situation on our doorstep. there are a number of hotspots that make you worry. not much you can do in your portfolio to prevent or react. francine: deanne julius, thank you for joining us. guy: join our central bank conversation. can draghi save the euro project? seems to have kept the plan on the rails for the moment. what impacts will qe have. "i'll do whatever it takes," he

famously uttered. @guyjohnsontv and @flacqua. francine: we speak to tim clark. allegations that his airline is benefiting from subsidies. ♪

francine: welcome to "the pulse." guy: these are the top headlines. francine: abb vie is buying pharma cyclic.

it will give at the -- abbvie control of a cancer drug. the price is 40% higher than pharmacyclics' closing price a week ago. guy: axel springer told us that latin america is an interesting market and his m&a focus remains digital. mr. springer: we see ourselves as a digital publisher and our focus is on digital assets or on super brands that have potential for global rollout. francine: if you are planning to enjoy steak in mumbai it could cost five years in prison. the government has banned possession of beef and byproducts as well as cows and bulls.

a victory for hardline hindu groups that have fought to protect an animal their religion considers holy. guy: the draghi distortion. markets react. any more details about the qe program, how is the program going to be rolled out? how are low interest rates going to disrupt europe's credit markets? simon joins us. the portfolio effect is still to be fully understood. what is the read from a program of buying govvies into the credit market. simon: the crowding effect. you see a chase for yields further and further down the quality curve. investors are being persuaded to take more risk at a lower yield

to hit the marginal return they are trying to get up the end of the year. we are expanding our risk profile but getting paid less at the end of the day. francine: what does it mean? if you are an investor and you are looking at the ecb news conference, what should they do? simon: stay long risk. you see a longer duration of assets being offered to the market. low coupons. gdf 1.5% coupon. in 20 years' time that is going to look less than fair value but that is the dear people -- that is the deal people are being persuaded to take to add the incremental yield. we are getting distorted because the cards are flattening dramatically between investment grade and high-yield. at times we are losing relative value considerations as to what should be priced where. nobody is going to bet against

qe. these distortions, you live with it and you profit from it. in the long-term this is not where curves can remain. guy: if you look at how companies can take advantage of this, if you are a big european company and you issue debt you are able to issue at low levels. berkshire hathaway trying to take advantage. simon: it is a boon for issuers at these levels. more and more issuers looking to refinance. very favorable for the u.s. issuer. a favorable level of funding in europe than at home, you got berkshire hathaway. you've got diversification of the investor base. francine: something we have to delve into and bring to our viewers. thank you for that. simon of bloomberg.

we will bring you the ecb news conference from 1:30 u.k. time. guy: can draghi save the euro project? tweet us. is he doing whatever it takes? will he do whatever it takes today? @flacqua, @guyjohnsontv. back in a couple minutes. ♪

francine: welcome back to "the pulse." live on bloomberg tv and streaming on the ipad. guy: etsy is going to the market. the site that sells everything from crocheted chickens to soviet era silliness has filed for a $100 million ipo. francine: leslie picker has numbers. leslie: etsy is about to become new york's biggest tech ipo since 1999. the company is an e-commerce site for buying and selling handmade and vintage goods. five numbers that explain growth -- 10 years. etsy was started in june 2005.

a golden age for tech ipos. these days tecchies like alibaba are waiting a decade before going public. twenty cents. sellers pay $.20 to list products and the company takes a 3.5% commission. $11.4 million. 56%. etsy says revenue increased 56 percent in one year, reaching $196 million last year. $97 million. etsy has gone through eight rounds of funding and raised nearly $100 million. it has the backing of some of the most high-profile technology investors, including accel partners and union square ventures. for a company that is all about art, etsy is ready to craft its

next meal. francine: etsy $100 million in 10 years. guy: did we have been on the program? francine: he was very engaging. i waste a lot of time on etsy. it is basically a marketplace. a little bit like what alibaba is for -- guy: everything else. let's take to the skies. an exclusive interview. our colleagues in asia speaking to the above kansas city at karsten sport -- speaking to the lufthansa ceo carsten spohr. >> the future of the sounds that -- the future of lufthansa is at stake. i'm sure we will come out with an agreement which will help us improve our profitability and competitiveness.

at the same time, create the future perspective for pilots as well. francine: the lufthansa ceo. guy: another global carrier emirates' president tim clark has been talking to hans nichols. talking about the a380 the new engine option he would like to see. fuel hedging. and allegations from u.s. carriers that his airline is benefiting from market distorting subsidies. francine: the second-largest tire maker, continental targets a 45% sales boost by 2020. we talk about numbers and a reason for optimism with the ceo. follow us on twitter. @guyjohnsontv and @flacqua. draghi in the ecb can they save the euro and the euro zone? guy: the two are fairly closely linked. we will take a break and be back in a couple minutes. ♪

francine: welcome back to "the pulse." guy: good morning, everybody. let's talk about the markets. how are they trading ahead of the ecb. manus: equity markets are trading up through seven year highs. warren buffett has issued bonds. he thinks it is so darn cheap to issue corporate bonds on this map.

that tells you something pretty historical about what is going on in the bond market here. different countries are delivering sovereign bonds at record low offerings. i had a conversation with blackrock this morning in terms of rights and what their perception is. they say that the u.s. needs to go first. they are calling for a summer hike from the u.s. and then the u.k. and overall that the european bond landscape is well anchored. that divergence between the u.s. and europe will continue to widen. european equities arising. the currency is also very much in focus. we are at an 11 year low and trading lower. it is a potent combination.

negative deposit rates, as well. they say you will see parity by the end of 2016, followed by $.90 by the and of 2017 -- end of 2017. you will hear a forceful rhetoric from mario draghi in terms of his utter determination to get to the target -- the inflation target. i leave you with this thought. it is an article i have just read. investors pulled $16.8 billion from u.s. equities. $16.9 billion to the divergence -- to the bond market. that is the biggest divergence

we have seen. francine: thank you. in 30 minutes, it is "surveillance." tom joins us for a preview. tom: we are looking at my bow tie, which needs to be fixed. first, gina martin adams will join us from wells fargo. her thoughts on whether equities can drive higher, particularly with all of the shades of quantitative easing going on. we will go to jonathan ferro in cyprus. important news out of china, also. we will talk to america's a unlinking economics about the politics of china. we are talking to a giant on international relations from

harvard university joseph nye. is the american century over? we are really looking forward to that. francine: it looks like you are going to have a great show. looking forward to it. guy: the second largest tire and vehicle maker reported earnings. they will increase revenue by 45% by the end of the decade. joining us from hanover is continental's ceo. good morning to you, sir. thank you for taking the time to speak with us. on a day when we are watching what the ecb does down in cyprus, could you tell me what this means for your business? >> we are purchasing rubber

material, base material for our tires in down currency. if the oil prices going down by about $10 this makes an advantage of about $50 million bottom line to us. this is a cross figure that assumes that prices would not come down in parallel. therefore, you never know how many of the $50 million will end up in our books. francine: give us a sense. it is much easier for you to make business at this level, right? >> i think the situation stabilized in the whole industry. we had slight growth last year. we are looking at slight growth this year. we moved faster than the market

in 2014. that is also the goal for 2015. volume wise, we are talking about production figures up by about 2% only. >> what is your -- guy: what is your expectation about how this industry is going to evolve from here? we saw through the financial downturn that many people have decided to switch to lower-cost options for tires. will that remain a permanent feature of the landscape? will people operate with cheaper tires? how do you see the situation developing? >> no, not really. it is depending on the market you are talking about. people attending to buy larger and more expensive wheels.

in southern europe it is understandable that people are buying mainly small vehicles. we have seen in development in the last couple of years that our share in premium tires continues to be increased over the cost. certainly this is our target and has to do with the size of the tires and the volume we are able to sell. francine: give us a sense of the change in the auto industry. we talk about driverless cars. we talk about google and apple. how is that going to change the industry? what does it mean for continental? >> it is a big opportunity for systems supplier like continental, francine. three major areas. the first one, environmental issues. we have to make the vehicles'

power cleaner. we need to plug-in hybrid systems at the premium end. we will connect the vehicle to the internet. the connection into the backend will provide us with complete new functionalities. certainly, it is our obligation to enhance safety, to bring the number of fatalities into the direction of zerom, and to prevent accidents completely. guy: are you working with any partners at the moment? could you see yourself working with apple or google directly? >> we are happy to be a supplier toward google. we made this announcement recently. we are treating google as other

customers around the world. if apple would really decide to enter the automotive industry we would be more than happy to serve as a supplier toward apple. apple has a great reputation, a strong brand, and a lot of financial strength. francine: you sign something with google to be their exclusive provider of tires when they developed cars? >> no customer is providing exclusivity to a supplier. that is only in limited cases for a limited period of time. tires are one product we are more than happy to sell to google in the future. guy: can i just ask you when you think about your business going forward, are you increasingly going to become a technology company? how should we think about continental?

are you having to employ a great number of programmers at the moment? how does it work in your preparation for this new era of the internet car? >> the car will get part of the internet. the internet, as such, for the consumer or the driver is more a comfort feature. young people want to have the same functionality as they have with their smartphones at home during work, inside the vehicle. that is only understandable. we will use the internet also to enhance safety and make driving more efficient. we are working together with our partners cisco, ibm, no kia -- nokia on a function that will provide the vehicle with everything relevant, weather

data, traffic data, from other vehicles in front of them. the vehicle will be able to look around the corner in the future. francine: thank you so much. the ceo of continental joining us from hanover, germany. guy: how will qe impact french reinsurance ♪ business? -- reinsurance business? ♪

francine: welcome back to "the pulse." guy: let's get you to time of our top stories. xiamoomi predicted sales of more than $15 billion. it comes as the company diversifies its lineup and expands into more overseas markets. francine: apple is pushing back manufacturing for its larger screened ipads. the production of the tablet is now scheduled to start around september, instead of the initial plans to begin this quarter. guy: j.crew has opened its first store in paris. we caught up with mickey drexler this morning and asked him, why paris?

mr. drexler: paris to us has always been the style capital of the world. you feel a certain style and quality about everything that is done here. it has been on our list. we love the district where we opened up. francine: we have been talking a lot the ecb and qe. reinsurers are big bondholders. how could rate levels affect returns? we are joined by the scor ceo. thank you so much for joining us on "the pulse." give us a sense of whether you are worried or relaxed about the financial experiment called qb in europe -- experiment, called qe in europe. mr. kessler: we are not responsible for the financial

crisis but we pay a huge cost because the return on the asset side is very low, as compared to previous years. this is a consequence of the quantitative easing that is taking place in the u.s. and europe. the financial contribution to the large institutional investors is really down as compared to what it was. it is a direct effect. it has an indirect effect on reinsurance. they are seeking return so the initial capacity to bear risk with the new competition we face , so we have fierce competition with all types of vehicles to bear the catastrophic risk around the globe.

negative direct effect. negative indirect effect. guy: you are being hit twice. can you run me through how you think the portfolio effect is going to work as a result of quantitative easing starting in europe? mr. kessler: we have a specific problem in europe. under the 72 regime we have to be careful about capital charges. when we invest in a government bond and we have no capital charge, but when invest in a corporate bond or private equity, we have capital charges that are quite high. we are led to invest in government bonds and the return is extremely low.

we have very low return on the asset side. when you combine the low return by the government bonds and the regulations that pressure us today to invest in government bonds instead of equity -- just to give you an idea if we invest in government bonds with a capital charge of $.37 for one dollar of investment. guy: ok. because of that, do you think you will be tendering your bonds to the ecb when it tries to buy those in the market? mr. kessler: certainly not. we still have capital gains on

the government bonds we bought 3-5 years ago. so why should i cede those bonds to the ecb? there is no reason to do that. from the start of the quantitative easing exercise announced in germany, i said it was going to be a problem that the ecb was going to face. i didn't know who was going to cede those bonds to the ecb. large investors like scor were going to keep those bonds. i think the shaping of the quantitative easing exercise it is too late, it should have been done three years ago and not today. it is too late. it is badly shaped. i don't think it is going to help a lot the recovery in europe. francine: you are basically saying -- and this is something

that analysts have told us -- because you own so many of these government bonds, that no one in your position would sell them and quantitative easing is way too late. what does it mean for the market? mr. kessler: it means that for the days we are living right now, it is very clear. investors by equities. -- investors buy equities. we create a series of bubbles because investors don't want to invest in government bonds and try to seek high-yield investments. that is why the stock exchange in paris has increased markedly since the first of january. it will continue for quarters to come.

because mario draghi announced that the quantitative easing exercise is going to announce -- last 24 months. they are seeking returns by investing in other classes of assets. for the real economy, i don't see how it is going to affect the recovery. francine: given what you are saying and the current record on stock markets, are you going to reduce your exposure to stocks if you say that this is a bubble? mr. kessler: many investors are prudent in this respect. when we invest in stocks we have capital charges, so we have to take everything into account. certainly, today we are seeking to invest in asset classes that are better with returns than government bonds. with government bonds, it is almost zero. if you have one billion to

invest in you go to government bonds, it is almost zero. today, we try to invest in other classes of assets. infrastructure is attracting attention, a high-yield. we like that, too. we buy real estate. convertibles. we buy equities sometimes. that is what all investors do. guy: do you think the most sensible thing that the authorities in europe could do now would be to play with the capital requirements of banks and big insurance/reinsurers like you if there is any expectation for quantitative easing to deliver? is that the next logical step? mr. kessler: we tried to convince the policymakers to come back on some of the capital

charges that were not reduced at a time when we did not see the consequence. when you shape the policy, it should be adaptive to the new situation that we live in today. that is where we are right now. we are asking the policymakers in europe to change the parameters, not the regime, the parameters. yes, that is certainly what they should do now in order to help us better manage our assets and contribute more to the recovery in europe, which is certainly delayed. francine: thank you so much. mr. denis kessler the ceo of scor a bloomberg exclusive. hans: he is quite upset about the charges that the u.s. carriers have leveled.

he wants to respond, but he also wants to get the information, what they are alleging. he spoke earlier to me in berlin. >> the fact that they should have published it in certain stakeholder areas in january -- the allegations are very serious -- without asking us or allowing us to respond to that. i have never known anything like that happening in my career. hans: mr. clark joins his colleague from air qatar who spoke to us yesterday complaining about what the u.s. carriers have done. the u.s. carriers have put together this document and lodged it with u.s. officials, alleging that there has been $42 billion in subsidies to the gulf state carriers from their home

their host countries. we are having response and we are at the beginning of a massive fight. potentially, the open skies initiative is in the balance. tim clark is going to be lobbying his case in the united states soon. he said he would be lobbying any official he could on capitol hill. francine: thank you so much. now, for a look at what we are watching for the rest of the day. we are joined by jonathan ferro. jonathan: three things to watch. talk to me about what you are actually going to buy now that you have announced quantitative easing. the forecast, the inflation forecast. how low do you see inflation? it could be as far out as 2017. that could give you an indication how far the program could last. then they are going to talk about greece.

they are going to talk about reintroducing the waiver as collateral. will they do that? when will they do that? guy: things are really heating up in cyprus. jonathan: in more than one way. the sun is out, the jacket is off. by the time the news conference starts, i would imagine that the tie and the shirt will be off as well. the beach is about 30 minutes that way. guy: i'm not sure if i'm cool with the idea of the shirt coming off. that may be a step too far. [laughter] that is what is coming up next. thank you very much indeed. "surveillance" is coming up next. we will be taking the press conference live and in full at 1:30 u.k. time. francine: keep it right here on

bloomberg tv. tom keene is up next. they will talk about the ecb and the boe. follow us on twitter. we will see you later. ♪

>> this is "bloomberg surveillance." tom: the european central bank meets in cyprus today. they will clarify their version of quantitative easing. jonathan ferro reports.

china struggles. we speak about the linkage of the chinese economy the fragile market, and the government in beijing. deadly serious business. the federal reserve is comedy central brought to you by janet yellen. good morning. this is "bloomberg surveillance." it is thursday. i'm tom keene. joining me, olivia sterns. brendan greeley is on sabbatical. olivia: the lowest economic growth target in 15 years from china. they want the economy to grow 7%. china is facing a number of headwinds. they want to make the economy more efficient. >> we need to develop twin engines to drive development. popular entrepreneurship and innovation