francine: the austrian central bank to deserve this ammunition of -- ahead of the fed decision later this month. third time lucky for bayer. the german company sweetening its bid for monsanto. where is the brexit plan? britain grapples to answer the question. we speak to former eu commissioner. ♪ francine: welcome to the pulse, live from bloomberg's european headquarters. i am francine lacqua.

president of the peterson institute for international economics, adam posen. stephen king joins us for the hour. we talked brexit in the euro economy. all of that is coming up. let's check these markets. for the u.s., yesterday was labor day good happy labor day with a day late. this is the picture among a lot of the asia economies. the stocks rallied in asia. they were rallying in europe. now they are down to 0.1%. the hike this month remains subdued. the australian dollar rising. crude oil trading above $45 a barrel after the world's producers pledged to cooperate to save lives. if you look at nymex, it is higher because of yesterday. even i on that. let's get this keep an eye on that. let's get to -- keep an eye on

that. let's get to bloomberg first word news with nara. -- with nejra. weakness does a dance. a surge in goods from the euro area. a series of data signaling they economic events and europe's largest economy has cooled. bayer has upped its bid for monsanto a second time. the chemical giant says it is now prepared to offer $127 and $.50 per share. share.ed is $27.50 per if the deal goes through, it would create the world's biggest producer of seeds and pesticides. has canceled a meeting with the president of the philippines. --t is after rodrigo doherty led too to territory --

the deaths of more than four to 27 suspects. -- he offeredeet the u.s. leader some blunt advice. >> i am a president of a sovereign state. [indiscernible] nobody but nobody. you must be respectful. do not just throw a questions and statements. nejra: global news, 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries. cehic.jra this is bloomberg. francine: taking so much. wait for the fed. that seems to be the approach for central-bank policy worldwide. economic adviser to japan's prime minister shinzo abe has suggested that the boj

should not act before the fed's policy announcement on the 21st of the month. the problem is the boj is off on the 21st. we find about the fed later on today. that is the problem when you on the other side of the world. we are joined by adam posen. stephen king, senior economic adviser. they both join us for the hour. take you for joining us. there's a lot happening for tuesday. -- the first tuesday in september. adam, i know we spoke a lot about negative rates. we do see a little bit of anxiousness from the rba, maybe from japan. we need to know what the fed does in december. adam: it is very convenient for people in japan and australia to say we are doing the following because of the fed or because of uncertainty about the fed. particular a more and australia. it is more of a demented issue.

they've got a new governor coming in. it makes sense for them to hold. japan is more interesting. there's an issue. abe, theye minister got governor kuroda, the bank of japan is clearly not a unilateral exchange. respecting the g7, the g-20 commitment. they are in a hard place. if the fed moves, it makes it slightly harder, but the real problem is do they have any traction echo francine: do they have -- any traction? francine: do they have any traction? steven: we discussed this in the past, the whole issue of what -- of what japan has achieved. it seems if you go back to a three years, there was this strong sense that things could change quite dramatically. very high expectations.

i rumored talking to a japanese fund manager back in 2013 saying this is a big change at the moment. a complete revolution in japan. you look at the actual outcomes relative to those high sevenations, the outcome -- the outcome has been disappointing. caroline: we have seen a lot -- francine: we have seen a lot of significant moves. tos is when yields assigned record lows in july. the yield is going up a touch. just above the zero bound. does that make a difference? adam: it certainly does. it makes a difference in terms of calibrating. what difference does it make if the boj moves right now? notwithstanding what stephen says in accidents that

this is not completely in long-term bet. the scaling a chart is like all fixed income scales are very compressed. it does make a difference in the short-term. francine: what is the worst-case scenario? on the 21st of september, the boj because of the time difference, we find out in the morning, five clyde london time and then we have the fed later. the worst-case scenario? the fed doesn't -- the boj doesn't do anything. adam: i think it is unlikely they will do anything at all. -- stephen: the bigger problem for both of them is the fed is wanting to raise interest rates but always finds it very difficult under the conditions to be able to do so. the actual performance of the u.s. economy has been worse than expected. possibly lower inflation.

they would like to get interest rates higher and a bit of a room to play around with should there be another downswing. they are finding it" to find the actual conditions. difficulte finding it to find the actual conditions. all -- : august is just like with your chart, the fed isn't going to be tempted by one month data -- one months data. i think stephen is right. there is a concern, less so much unity about needing to raise rates, more about the economy does have a fundamentally underperforming. when you look at janet yellen's speech at jackson hole. the most important thing to essentiallyhat she endorsed some version of stagnation.

she basically said no, our star, trend growth rate, neutral interest rate are down which is her way of saying we should not expect too much. stephen: if your interest rates have come down to a low level, the actual interest rate is much smaller than indicated. the risk of getting it wrong by raising rates too early possibly too high. the danger if they raise rates, it turns out i was is lower than previously thought. they are forced to going to reverse. adam: in addition to the angle of your face, there's the issue that since our star is what the rate would be is lower. the policy is less lucid than people thought. how much? a little less. francine: the choice is a credibility problem.

you reverse and people may understand that in these turbulent times you have to do what is necessary. or you wait and you risk a real troublesome raise. adam: i think that is exaggerated. francine: i know, we talked about it. adam: i think people like charlie evans from fed chicago and john williams from san francisco have raise questions about this idea that if you raise quickly, you don't want to be forced to be raise quickly. it may not be that bad. stephen: it simply hasn't been the inflation that people have predicted. that may come through at some point. you got a lot of economists saying we need to have higher inflation to achieve our real growth objectives did a higher inflation -- growth objectives

-- there is no real urgency. adam: the chair did shoot that down. francine: there was a paper that had a lot of traction. we will come back and talk about this essential and the changing of the targets from some of the central banks. adam posen and stephen king stay with us. plenty coming up including where is the plan? brexit territory -- brexit secretary david davis -- has he convinced critics that he is brexit under control? third time lucky for bayer. they sweeten the monsanto bid again. talk in theade presidential campaign.

they one of the risk of anti-globalization. this is bloomberg. ♪

francine: this is the pulse. i am francine lacqua. let's get to bloomberg business flash with nejra cehic. nejra: bayer has up its bid for monsanto is second time. it says it is now prepared to offer $127.50 per share. monsanto's less close in new

york if the deal goes through, it would create the world biggest crater of seeds and pesticides. airbus has won about $6.5 billion of orders from carriers in vietnam. the state owned been on airline signed a deal to provide wide-body aircraft. agreed --e time, -- vietnam's only private airlines fines and order for 21 planes. europe's biggest public we traded health care provider is for spain's largest hospital company. the rest held by the hospital company management. general motors has settled the final two bellwether cases of a

ignition switch board. averting -- terms of the settlement were confidential but both lawsuits claimed injuries caused by accident linked to switches that could jostle into the off position. that is the bloomberg business flash. francine. francine: the men responsible for negotiating -- the man responsible for negotiating -- david exit says davies said the people of the u.k. have given clear instructions to leave the eu. >> the prime minister is clear, there will be no attempts to stay in the eu by the back door, no attempt to thwart the will of the people. no attempt to engineer a second referendum. because of people did not like the first answer. hereine: adam posen is joined by stephen king.

-- if only they had a plan. people would make it so much easier. are we being too mean? >> we are being a little trivialized. whatever the plan is, it is still going to be plant -- it is still going to be bad. maybe the pm eyes and the date of this month -- maybe the pmi's and the data this month. this is a fundamental real shock. francine: what do we ask a know of what brexit mean? stephen: we know very little. this is like a divorce. we know what britain wanted to leave, we don't know what it wants to do consequently. all of these things are out there. they are all uncertainties. saying -- that

what --ally -- that is there are a lot of uncertainties out there. [indiscernible] the japanese put this piece out saying they are worried about britain. grabs itll up for francine: they said that all before -- grabs here it francine: they said that all before. adam: if you read the report, it is a thorough report. we did see this before. toyota and nissan was at plants in the u.k. telling their workers, this is the reality. this is what is going to happen. the do six around the plan voted for brexit. this is why i think you are missing the point. it isn't about what option britain wants to take.

britain is going to lose access to the single market. europeans are going to have to have much more power to make the decision than the british are. stephen: it becomes much more important. the u.k. has a whopping amount of balance. some of that funding has come from foreign investment because the u.k. has access to the sick a market. -- access to the single market. nothing because everyone has access to the single market. the key thing is this, if people are going to be investing in and they are a part of the signal market, and britain is no longer a part of the single market, it is likely -- you have a whole in the account deficit.

you cannot find it very easily. -- you cannot fund it very easily. a -- narrowot do through a really big squeeze. not next month but the next three or four years. it will be a period of growth underperforming. francine: is there nothing they can do? i understand where you are coming from. there is almost a conscious collective in the u.k. because we had encouraging data saying we are not as bad as we thought we would be. a point where they can make money. what is the best case scenario echo -- scenario? win-win.is to say it is not be worse for the u.k. than germany, doesn't say there is in some loss for germany. it is important that people

recognize this. both sides were better off. is there a better scenario? yes, but you have to understand that or a europe that is to build something and keep the building they've already got, they are deterring more of this activity of countries opting out is a very real and pressing issue. it is not something they are going to trade off on. the other point is look at the swiss case. they're all these different models. the swiss are popular in europe, their economy is integrated with germany. they are still being played very hard ball with by the europeans before exit. francine: adam posen and stephen king stay with us. we haven't even touched on mark carney. that is coming up later in the program. chemical brothers, bayer

sweetening the deal for monsanto. we discussed that next. this is bloomberg. ♪

francine: welcome back to "the pulse." bayer has made another takeover bid for monsanto. the chemical giant says it is prepared to pay $127.50 per share.

sam, how significant is this echo does it mean that it will clinch it? can they still lose it? sam: we have been saying that we think the minimum would have to -- $135 perent share. $149 perout at about share. thisury has to still be needs to be a higher bid. francine: are they overpaying for monsanto? you are seeing so much consolidation it is one of those real asset flush outs. sam: if the company is serious about billing its business this building its business in a fast way -- building its business in a fast way, the margin profile, this is the way to do it. is it overpaying? thatu go by the multiple

can china is paying for syngenta, that is not the case. that's whatat is it is in it for bayer? -- what is in it for bayer? for we would like to see the confusion would be if you call it health care, by the end of the day, pharmaceuticals, animal health or consumer health, they don't necessarily fit together. we think this has got to be something that is got to be a part of the longer game. probably quite positive for shareholders. francine: sam facility from bloomberg intelligence going through this new deal. i know will get a whole lot throughout the day. up next, the big debate.

we'll hear from olli rehn. we'll go back to stephen king .nd mr. adam posen we will be asking them whether mark carney was too soon to act in the wake of brexit. this is bloomberg. ♪

francine: welcome to "the pulse." live from bloomberg's european headquarters in london, i'm francine lacqua. nejra: german factory orders increased less than forecast in july. orders adjusted for seasonal swings and inflation rose 0.2% from june. the report follows a series of data signaling that economic momentum in europe's largest economy has cooled. bayer has upped it bid for

monsanto as they are prepared to offer $127 $.50 per share. if the deal goes through it would create the world's biggest producer of seeds and pesticides. in july, monsanto rejected the bid saying it was inadequate. barack obama has canceled a meeting with the president of the philippines after rodrigo duterte unleashed an expletive later of warning against the morningexpletive laden against the u.s. obama and to meet offered him some blunt advice. >> i am a president of a sovereign state and we have long ceased to be a colony. any master except the filipino people. nobody, but nobody.

you must be respectful. --not nejra: global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. cehic.ra this is bloomberg. francine: what a brilliant story. --m pozen, president of the and stephen king are still with us. we will be talking more about brexit we are looking at the economic implications and possible trade relationships piece -- relationships. a u.k.morrow we have tory lawmaker that will probably once again skews him of being impartial and say he acted too early on rates. do you agree, should he have waited?

i think he should have done exactly what he did. -- >> i think he should have done exactly what he did. it is important to recognize that there have been increasing uncin regard to the medium-term outlook of the economy and it is important to recognize that some who think the only cost of brexit was in july and august of this year and will be completely ok is a ridiculous claim. as this process terminally --ered u.k. living standards permanently lowered u.k. living standards? things had to adjust. the world has changed, u.k.'s condition has changed. -- does: how much the the weaker pound help and who does it help? it helps towards him and manufacturing at the market? stephen: i think it is an easier way of taking the pain rather

than being a big help. you get no funding whatsoever. the other version is you end up with sterling falling quite a long way, headline inflation rises and everyone receives a bit of a wage squeeze. ofthis sense, it is a way making sure the pain is distributed across the whole nation as opposed to specifically those who might end up losing their jobs. you might say as a better way of accepting the pain than the alternative. adam: i've completely agree with stephen. i think the banks got it right, hoped they would have cut it more aggressively but the analysis that stephen gave a think is right. competitiveness of the u.k., it's real profitability and productivity has been taken a real hit so the adjustment to living standards unfortunately was part of it.

i agree, the bank is making the right choice which is to smooth that. danger that there a the bank becomes too politicized? carney toecting mark stay on from the term that this is all out in the open. stephen: at the end of the day central banks want to have their exampleence but if for -- i do not think they would be doing its job properly. it has to be thinking about the economic conditions. it has to have an analysis which says under scenario a and scenario b, different things happen. where doesncine: europe stand, that is the question for britain as it prepares to flesh out its plan for life after the eu. joining me is the minister of economic affairs and

commissioned minister. we were just debating about what kind of agreement britain could aspire to. you must still have insiders in brussels. hearing, kind of agreement would be ideal at this time for the eu? honest, i have been more preoccupied with issues related to finland and finland's economic recovery. francine: that is a difficult matter. olli: for a minister of this government is the sentiment first and foremost the priority. more seriously, we are now waiting for the u.k. government to decide what it wants from the future relationship so that beicle 50 application could launched and the negotiations on the future relationship should be started.

in my view, it is important that relationship-u.k. would mean that britain would be a close partner for the european union also in the future, and i believe that it is important the trade policy framework should likewise be made mutually beneficial. francine: i want to go back to finland and then we will get back to the brexit debate. finland's gdp was flat and you are trying to spur consumption by providing tax breaks. how long can you do that? olli: we have decided on tax cuts for next year, both for in the context of the competitive factor. the good news of the finnish economy is at this years economy

growth is now expected to be positive 1.1%, according to the ministry of finance. for instance today, nordea bank just released its forecaster 1% growth, double what they previously expected. the four-year recession, structural stagnation against to be over. we are turning the page in this. it is not easy but we have a broad consensus in the finished society that we have to restore our cup hot -- in the finish society thatnnish we have to restore our compatibility. francine: when are you expecting to have some kind of plan for

the brexit debate? you are dealing with problems at home but this is kind of a collective that needs to be dealt with. is it better to wait to invoke article 50 until 2019 or start talking about it now? we first have to have some clarity on the position of the u.k. government. then the note can she asian -- begin, ands can there's a certain procedure as to how this should be done. our priority of course is to secure the functioning and unity of the european union, and at the same time continue to ofelop the european union 27. the purpose of the european union has not changed with the brexit vote. nations andong freedom and well-being of

cities, that is what we are working for. it the eu'so regain legitimacy, have to focus on issues such as promoting sustainable growth and better market.on in the single that also means that countries like finland with the absence of the u.k. in the future will have to focus more on issues like free trade and single market as we believe they are good for europe and good for the global economy. minister, adam pozen has a question for you. adam: thank you so much. i just wanted to ask you as an economy minister within europe, how do you see the issues in that context of tax competition or regulatory competition, including what some people call race to the bottom? we have had apple and ireland being overruled by the competition commissioner. we have that playing out u.k. in

terms of making some people feel that brexit takes more sense under the circumstances. and then of course part of what the u.k. may represent for europe is an offshore in tax terms. how do you see that issue? olli: thank you for this question. i would say two important issues. think better i regulation, we are much in favor of that and we have been supporting the commission in its efforts to pursue your this route. we are doing that back home as well because we believe that european businesses are suffering from excessive regulatory burdens in many areas. for the singlent market and for making european enterprises flourish. at the same time, excessive

corporate tax competition would not be beneficial for europe. i agree that it is important that we do not overtax our companies, and we are very careful about that. we have done some reforms to improve access. outright tax competition of corporate's and businesses would really lead to detrimental results for the whole of europe and all of the society. hope thatnse, i would the u.k. government would not try to enter into a race of tax competition because then i think the rest of europe will be compelled to oppose this route. francine: we also have a

question from stephen king. stephen: minister, inc. you for coming on the program. my question is about the four freedoms. the sense i get that the u.k. wants to cherry pick the four freedoms. it wants to have perfect access ideally to the single market but at the same time have control of its immigration. those are the two big issues that people talk about. is it anyway possible in your view to be able to cherry pick in that way? is it possible for the u.k. to have membership to the single market and have control of immigration or is that a complete no-no? i think it is important that written will indeed be -- britain will indeed be a close partner for the eu in the future and that our trading relationship would be made mutually beneficial.

but at the same time, the question of britain's access to the single market will no doubt be at the core of the negotiations. europe it is of utmost importance not to work down the four freedoms. questionates to your about the free movement of people and workers as well as the ease of free movement in relation to financial services. this principle was clearly stated by the leaders of the european union and the european council in june. that is how we see it and at the ,ame time i can say that i have my mother was an english teacher and i have two cousins with a british passport, and i'm a longtime supporter so i would like to have a very close

relationship with great britain. but at the same time i would say that it is britain who will take interests within the confidence of the well-known british diplomacy. it is for me to take care of the finish and european interests related to brexit. way, i was in favor of remaining. francine: thank you so much. we need to do a whole program on simple transfers and we will invite the finance minister economic conditions. and stephenam posen king. both stay with us and we will talk about trade and g-20. stocks are near an eight year high. the markets to watch and

monitory our fiscal stimulus, which does the world need? we wattoined by ewen cameron for surveillance. ♪

francine: the markets up slightly this morning. it depends on the minute. they were up a couple of minutes ago. mark: and now they are up again

by 0.02%. barely changed. what, because of the slight gain it is the highest since january. little changed. investors are waiting for this thursday's ecb meeting. buyers -- bayer is an advance giant,o buy a u.s. see they would be prepared to pay $127.50 a share provided a negotiated deal can be reached, 2% more than the previous bid. bayer shares down one corner of 1%. airbus one about $1.6 billion worth of business for carriers in vietnam. they signed the deals in hanoi

today with the french president who is visiting vietnam were their travel has risen by 3%. the big central-bank story today was the central bank in australia, the rba. in the final meeting governor glenn stevens left rates unchanged. this is an ugly chart. it shows how the aussie dollar since glenn stevens became the governor of september the eighth, 2006 as the blue line, literally remain unchanged. it has fluctuated in that 10 year period but the white line is the cash rate which is down to a record low, 1.5%. the aussie dollar unchanged. certainly a currency day. leaders of the g-20 say more must be done to spread the benefit of global trade.

for appropriate domestic policies to ensure benefits of trade are widely distributed. should governments be using fiscal policy more practically and how should they read china? more with adam posen and stephen king. this is a yuan chart, the renminbi. .oday nearing a six-year low bears are testing pboc tolerance. adam: it goes to the fiscal point. economic and political arguments are obvious yet no one does it. if you go back a few years, china was very active on fiscal stimulus in a constructive way and right now they are reluctant to do it. as many people of pointed out the are creating all kinds of distortions in their financial system and that has to bear down on the currency because that gives the signal that maybe the reform process is not as strong in china because they are unable to take positive action.

you could flip it around and say the same for the u.s. francine: that is fair but i guess china is the most unknown. day in andut the fed day out, we talk about brexit. why have we not talked about china? program.it is your francine: the markets are not in a panic mode at all, they are stable. stephen: there was a fear at the beginning of the year that china would have a deep, hard landing. the fear that was there has faded. francine: but the debt is still there. stephen: absolutely. on the whole fiscal issue, if you go back to the london g-20 summit in 2009 there was a very strong commitment on behalf of germans, and americans to sustain fiscal expansion until the global economy had properly recovered. that is what they said.

francine: seven years ago. the chinese and germans stuck to the plan but gave up because the others were not playing their role. francine: why? stephen: they were worried about the increase in debt, politics changed in their countries, and they felt this was an unstable story. -- played their role better than the other countries. now we have got these imbalances that we did not want to have. francine: at the time we were talking about bond vigilantes. now we have the ecb and this is when europe should start wrapping up fiscal policy. adam: it was nonsense at the time and i think stephen was one and i was one that said the u.k. was not greece, germany certainly was not greece. the kind of fiscal restraint that was opposed in the g-20 in 2007 was not china.

it was a terrible mistake and we are seeing that now. i see a potential for a big shift in the next year. japan is committed to fiscal expansion. francine: a shift for the best? adam: for an improvement, never the best. germany is going to have an election cycle and kickback some of their money. u.k., theresa may is going to have no choice what to do fiscal stimulus. wins, ithink whoever think both sides want to do fiscal stimulus and we will be in a different space a year from now. francine: it takes longer, doesn't it, to feel the benefits of fiscal policy? stephen: my concern is regarding japan. japan occasionally did do fiscal expansion over the last five years. for whatever reason, they are going to reverse often because

the debt levels were already behind. interest rates at ridiculously low levels you are much more happy to live with high levels of debt but politically it appears difficult to do it and it keeps coming back all the time. these are populist arguments. stop, starts process for fiscal policy francine:. don't they need to intervene directly on the yen? and structural reform has been lackluster. stephen: everybody ideally once a weaker currency at the moment. the british want a weaker pound. everyone wants a weaker currency. you are into kind of a currency war story that might eventually lead to looser marco -- market conditions. i think there is a limit to what you can do it i think adam is

right, once you run out of room on monetary space you are almost forced to go into the fiscal arena and do something. adam: let me give two more hopeful twists. picking up on what we have been talking about, i think it -- if itf it is most is the majority of the g seven. , for japan theg challenge and opportunity is to link fiscal stimulus and structural reform. there has been a populist sentiment that if you do fiscal policy, structural reform goes backward but it is not necessarily the case. i think japan, for all their problems as her credit as they combined huge structural reform in the label market, a huge raise in female market participation, and they did this with fiscal reform. francine: this is fun, we will

get you back on very soon. stephen king and adam posen. stay with bloomberg, "surveillance" is up next. we kick off the conversation --h black rocks ♪

francine: the rba holds fire, the australian central bank withheld its ammunition leaving a clean slate for the governor's successor. bayer sweetens its bid for monsanto, is $56 billion enough? while the central bank extend qe this week? this is bloomberg "surveillance ," francine lacqua in london, tom keene in new york. this is the picture overall for the very important gdp figure coming out of the eu. it is important because it has