>> renzi to resign. a resounding rejection of his reforms plunges italy into a political crisis. the euro touches a 20 month low. italy's lenders teeter in the results. banca monte dei paschi meets. and populism push back. dependent defeats a right wing.

the french prime minister valls will make an announcement regarding his 2017 candidacy. we're coming to you live. coming up, we have a current lineup of guests to figure out what this political turmoil means for italy, specifically the banks. i will be joined by the former finance minister and now a professor. and a little bit later on, we ofl be joined by the ceo intesa sanpaolo, carlo messina. so, have plenty coming your way. we need to figure out whether this vote was a populist vote, or whether italians were afraid of giving too much power to the lower house, and consequently, to the premise or. first, let's get to the

bloomberg first word news. reporter: the italian prime minister says he will resign after losing a referendum, his call to push through constitutional changes. won 60% to 40% with almost all those counted. the results threatened renewed political and financial turmoil in europe. a green party backed leftist will be the next president of austria. alexander van der bellen ran as an independent and took almost 52% of the vote as he defeated nobert hofer. this comes within a resurgence of the anti-immigrant right wing parties around the world. the french president will make an announcement at 5:30 p .m. u.k. time. his announcement did not say what he would announce, but valls is expected to declare his 2017dacy in france's

presidential election. president hollande said he will not seek reelection and valls previously said he would run if hollande did not. president-elect donald trump used twitter to renew criticism of china after a backlash over his phone call with taiwan's president. he tweeted that beijing did not ask the u.s. for permission to devalue its currency or to build up its military presence in the south china sea. facing complains that trump -- beijing complains that trump blood to decades of legal protocol by speaking directly with tsai ing-wen. global news 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries around the world. and this iston bloomberg. just getting some services data out of the eurozone crossing the bloomberg. this is the final pmi services figure.

53.8 is the figure, which is slightly below the earlier estimate on the composite index, which is the amalgam of services and manufacturing, 53 53.9, versus the preliminary number of 54.1. in light of the renzi upcoming resignation after the notorious no vote, europe is shurgging it off. -- shrugging it off. the ftse is now 1.3% higher. we have gains in germany and london. the big moving asset today is the dollar, money moving into the dollar and money moving out of the euro, down by 0.25%, falling to the weakest since march 2015. the big figure to watch is 1.04 96. that is the close in march of 20

15, and the lowest since january 2003. ten-year yield in italy is rising. gold is falling today, initially gaining. concern once again, focusing on the impending fed decision, when it is expected to raise rates, not good for gold. let's finish off with the italian lenders. unicredit is unchanged. monte paschi was 7% lower at the open, but it has rebounded. unchanged.are is and intesa sonpaolo is up 1.8%. francine, back to you. francine: thank you. i want to go back to the political upheaval. i think the story does move on to the banks. we saw this initial reaction with all banking shares in italy

falling, though they are now regaining. i don't know whether the markets are not too worried about the political turmoil. first, let's listen to matteo renzi, announcing in a news conference at midnight last night that he would resign. >> it is clear that my government ends here. i want to thank my ministers for extraordinary adventure and i will offer my resignation to the president of the republic. francine: well, very pleased to welcome my next guest for the next 30 minutes, the first of a great lineup of guests, the former italian finance minister. , always aaccomanni pleasure to speak to you. the market seemed to be taking this in stride. a lot of the banking stocks are up. will it be ok? political turmoil is no stranger to italy.

>> the expectation that the results of this referendum would impact on italy and possibly come even on the eurozone were grossly exaggerated. unfortunately, have a large experience in dealing with political crises. republicdent of the will receive the resignation of the prime minister their very correctly. the president of the republic, of course, could even ask mr. renzi to go before parliament for a full vote of confidence in order to find out whether, you know, the parliamentary democracy like italy, whether there is a loss of confidence in the party, in the parliament.

the democratic party is still the largest party in parliament. although there are minorities that voted "no" in the referendum, i assume they would like to live up to their responsibilities, being the largest party in parliament. francine: was this a vote for the populist parties? was this a clear movement win for the five star, or was it that the referendum was deemd not good enough? >> i think frankly, the "no" group actually a collection of diverse political parties. mr.burlosconi, the five star, but also the minority of the democratic party and the extreme left. difficult to very construct a road for an alternative majority to the

current majority in parliament. certainly, a number of factors are at play. certainly, the reform was difficult to understand. it is a technicality. i think it was at some point, personalized by the prime minister himself, who said this was a vote -- francine: was that a mistake? >> i think it was a mistake. in italy, also the referendum was not a decision by the government. it was requested by the constitution. if parliament approves a constitutional reform without the required 2/3 majority, then it is obliged to obtain a confirmation through a popular referendum. so, it was not comparable to the brexit referendum, or even to ae u.s., which did signal

much more fundamental political change. here, in italy, certainly,th the certain favor for reform in the constitution. it has been the idea of reducing the power of the senate, that has been discussed since the many days of the constitutional debate in 1948. and it was fully understood that having two houses of parliament with exactly the same power was perhaps a guarantee against a return to a neofascist dictatorship or anything like that, but it is not very efficient. caroline: talking about dictatorships, and populist parties coming into power, do you believe that with the "no" electoraling, the reform will be done quickly and it limits the chance of populist parties to come into power?

>> i think that is certainly, the top priority for anybody in parliament. and i think the prime minister himself, he dictated to the "no" camp to come up with a concrete proposal that could obtain a broad. support in parliament. -- a broad support in parliament. i cannot see how we could postpone this decision now. incidentally, the current electorate is subject to renew by the constitutional court. so, i think that would be the top priority of the agenda of the new government, whomever is going to lead it. francine: that is the key question. that is exactly what i will ask you. we will go through the main players in italy, that we understand. the p his afternoon,

resignation takes place. another thing, padoan, the italians foreig finance minister was meant to be in brussels. he has canceled a meeting and is one of the front runners to take a big role in the government. but the prime and asserted ask all of his cabinet members to meet this afternoon. we cannot rate too much into that yet. coming up, we will be talking about a resounding rejection of constitutional reform. we will talk about the banks, monte paschi. we know they are waiting on the go ahead of the 5 billion euro recap. and then we will talk more about pro-european independence, the freedom party in austria. much more coming up right here on "bloomberg surveillance." ♪

francine: welcome back. we are live in rome throughout the day to talk about this referendum. to thisding "no" referendum. matteo renzi last night said he would resign and that it was unlikely he would reform the government. let's see what happens when he goes to tend his resignation officially. he will meet with the president

later on today. i am pleased to say we are back formerr guest, the finance minister of italy. fabrizio saccomanni, because italy has been through this many times, i mean, 63 governments in 70 years, the market seems to take it a little bit, i guess, with higher spirits than what we saw this morning. >> i mean, the technocratic government is the definition that has been rejected by those who were part of that type of government. we, in italy, to form a government, you have to obtain confidence from parliament. once you obtain the confidence, you will become a political government. that was the case throughout our constitutional history. it has the full power. it never diminishes or reduces power to specific issues.

so, i think the technocratic government today would probably be very much involved in discussing the electoral reform because that is the top priority. caroline: professor, with all due respect, the problem with the technocratic government, is that they did not last very long. how long will this next government last? >> well, there are clearly two options. thisould be that government would last until the end of the legislature, which would be the spring of 2018. another option would be that th ey managed to reform the electoral law in a very short time. thethen the election of spring of 2017, which would cide with the french and german elections.

that could be a good reason not to go overboard in 2017 with all these elections. but we depend very much on the consultation that the president of the republic will have in the coming weeks. also, how quickly the parliament would be able to discuss, you know, a new draft electoral law. turnout: with a record do you see this as a wave of populism, or is it too far-fetched? >> when i was listening to the italian radio this morning, a number of people said, you know, i don't like the fact that mike vote was taken as a vote against the government. it was a vote against the reforms. the reform was complicated. there was perhaps, some misunderstanding about the fact

that too much power would be given to the prime minister. this was not the case. as i said, abusing the power of one of the two houses in efficiency more than a danger for democracy. in all of other europe, no second house votes on the budget or the confidence of the government. it plays a different role. i don't think this was really the issue. but i think at this stage, you bew, the risk that there may a tendency to interpret this vote as a sort of blank check to populist movements, i think this would be probably going a little too far. i think the vote was a mixture

of different feelings. francine: fabrizio saccomanni, thank you. i want to ask him, what happened to italian growth? it is barely growing and gdp is flat, stagnant. we see huge unemployment. the unemployment for the year is about 20%. how do you get italy back to work? how do you create reforms that this country needs? that is what i will be asking professor saccomani. this is "bloomberg surveillance." this is bloomberg. ♪

francine: this is "bloomberg surveillance." i'm francine lacqua, here in italy, looking at the follow-up and opportunities of this referendum. a record turnaround here. voted the votes, "no." we are back with fabrizio saccomanni. the million-dollar question is how you gorw in italy -- how you right? italy,r

>> we have to have an economy reentering reforms. perhaps the present government o much time discussing constitutional and political reforms. we have to continue with the judicial and fiscal system. these are the reforms that would help increase our productivity in this economy, which has been the main source of growth. having said that, i think italy was very badly hit by the crisis. i think it has been growing slowly, but returning back to growth. and i think italy was also confronted with the need to reduce its public fiscal deficit, and to contain the growth of the public debt. unfortunately, the recession and the low rate of inflation have made the debt consolidation process more difficult.

i think now the top priority would be to concentrate on this this market reentry perform. i think the labor market has b een received positively. and a number of people have been employed under the new legislation. so, i think the public administration with that system and the judicial system needs to be reformed. francine: fabrizio saccomanni, thank you for joining me, the former italian finance ministers. coming up, we speak to carlo messina, and we focus on the banks. this is bloomberg. ♪ seeing is believing, and that's why

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visit an xfinity store today and see for yourself. xfinity, the future of awesome. speed always wins. especially in my business. with slow internet from the phone company, you can't keep up. you're stuck, watching spinning wheels and progress bars until someone else scoops your story. switch to comcast business. with high-speed internet up to 10 gigabits per second. you wouldn't pick a slow race car. then why settle for slow internet? comcast business. built for speed. built for business. of "bloomberg surveillance," coming to you live from italy, where we had that crushing defeat of matteo renzi.

i went to the polls yesterday and 60% of the votes were a "no" vote. for more on the referendum, let's get straight to mark barton for the bloomberg first word news. says he: matteo renzi will resign after losing a referendum. opponents to his proposal to reign in the power of the senate won the referendum with 60% to 40%. the result threatens renewed political and financial turmoil for europe. leftistparty backed will be the next president of austria. alexander van der bellen ran as an independent and took a most 52% of the vote as he defeated norbert hofer from the freedom party. french prime minister valls is to make an announcement at 5:30

p.m. u.k. time. his office did not say what he would announce, but valls is expected to declare his candidacy in france's 27th election. president hollande said last week he will not seek reelection and valls previously said he would run if hollande did not. donald trump has used twitter to renew criticism of china over a backlash over his phone call with taiwan's president. beijing didd that not ask permission to devalue its currency or to build its military presence in the south china sea. beijing complained that trump flouted decades of diplomatic protocol by speaking directly with tsai ing-wen. global news 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries around the world. i'm mark barton. just had some services that out of the u.k.

it is a stronger figure than anticipated and a stronger figure than the prior month, up to 55.2, showing the services economy expanded, up from 54.5 the previous month. the composite of services and manufacturing rising to 55.2. this shows resilience post brexit. francine? francine: thank you, mark. we are live in rome throughout the day to try to understand the fallout and opportunities that could come out of this referendum. the banks started the session significantly lower. now, they are recouping losses. welcome carlo messina, the ceo of intesa sanpaolo. you have great insight. the share price was down, and now they are recouping a little bit. should investors and international investors worry

about the italian discount because of political turmoil? >> there was too much overselling before the referendum. it is now time to look at a different approach toward the banking system in italy, apart from banca monte dei paschi. francine: we have to remind our shareholders that there are different italian banks. they are not all credit equals. goingiggest competitor, through troubling times. you are in a better position. what would you be asking of the new government in italy? >> we would be asking they continue the process of reforming. there is no doubt we have a significant public debt. at this point today, we are not

in such a difficult situation like 2011, because do not forget the 50% of the debt is in international investment and today, only 30% is. it is not so huge like in 2011. we have to continue the process of reform. we have to reform under an economy reform that must be completed. francine: this would mean it would make your life easier if the president would ask somebody -- one of they names that has been put out there is the finance minister. if he is in charge of the market, will that help? >> positively. if there is a person with significant relationship with investors, that could end trepidation. padoan is the right person. he will be the key point of

success. there will be other items that are key in the success of the government. francine: the prime minister staked his job on this. was this a mistake? or does he need to step down completely, or take some croel ile in the new government? >> it is clear he will not take any position in the new government. a politician. but in case, renzi is very tough. he is the source of this country. this could be a pitstop for another response ability. francine: i like that, a pitstop. does this change any of your plans? i know you are looking at acquisitions. do you need to take a pause to figure out what this leads to? >> in italy, i consider the gdp.

the process of the economy is andkey factor for banking economic power. a certificate way with an one year. italy, we have significant signs of recovery. we have used nonperforming loans in-- way within one year. we are in a unique position to deliver the business model. i need to better understand what that could mean from the new government, but i am confident. francine: what is the worst-case scenario for the real economy? are owned by rea retail investors. would this be the end of the italian banking sector? >> don't forget, monte paschi has a market share of 54% in italy. we are not talking about a major

account. it is more, it is clear that the story at the moment, talking about monte paschi, talking about the market share, we have a strong rise. i don't see significant threats being dangerous for the entire banking system. monte paschi is a normal bank. zero nonperforming loans. there is no other bank in europe with no nonperforming loans. you need them to understand and fully price in th e nuances of the italian politics. >> the point of international investors is that it is clear

they are moving towards speculation and trying to put on the perceived weak part of the european banking sector. it is also a market of push from the nonperforming loans. it is my expectation they have to push because to set a leverage of 3%, you forget, that the lehman leverage was 3% at the timing of the crisis. so, you can see that as the leverage for the european field. i think it is not possible to add the 3% leverage in. so, today they are fully focusing on nonperforming loans and the second part will be leverage of assets. and that typically, of french and the german banking system. andit is stagnation regulators pushing on different inking systems.

-- different banking systems. francine: do you think the regulation will change? do you think donald trump will the regular wall street? is that extra pressure on european banks? >> i am not talking about -- in a sense, we need to have a very stable banking sector adnnd the ecb is making the right job with the european banking sector. we are at the right level. could bealuation dangerous. francine: what about mergers? >> the point of mergers is there is the possibility to create money for your shareholders. it is good to have the cross board merger. and if you want to cross board europe to great mergers, he need to have synergy. you need to improve the

combination within europe. it is also a, matter of the model. this probably would be something european connections. fun times in the last two years, but given that there is a question mark in the market that banca monte dei paschi can do this calculation, what is the next step? is it nationalization? would you consider taking it over? >> absolutely not. there is no possibility for us. we are different agency. it will be something to keep within the people's organization. people.t to keep it is to motivate people.

there is no possibility to enter into monte paschi. francine: what do you think the priority for the next government should be to the italy back to growth? >> it is absolutely to continue the process of reforms because in reality, the growth in italy, if you see the figures from the first quarter, italy grew more than germany and france. the initial contact would be 1%. that couldrowth allow the real economy to grow. we are seeing in nonperforming loans, that prices are leveling. we see this in the amount of loans and asset management. so, the process of reform, they have to bspeed that up. francine: matt when i was walkig

around and a speaking to people, people are fed up. unemployment is very high. how do you give back hope to your citizens? >> that is a good point relating to social conditions. the point of unemployment is very important. but the government increased the number of employees and they have to continue within this s train. in reality, it is a process that creates some issues. francine: is it the wrong priority to focus a much unconstitutional reform, rather than the market? >> that is a good point and again, i am not a politician. my priority is to have the real economy to come back to the process of significant growth. we need to reach the growth of france and germany. that is the target of the real economy for italy. in my view, the perception is we need to have something that can

create an engine for growth within the real economy. francine: i know you are looking for acquisitions. where do you see the growth coming from? if you do not get as much as you are hoping from in the next year, where is the region that will grow the most? >> the point of the acquisition is also to add the target. in reality, you can look at acquisitions from a theoretical point of view. acquisitions today are something that, if you look at the combination of price and litigation and other outcomes, they are not a priority for us. francine: thank you for joining us. that is carlo messina, the ceo of intesa sanpaolo. we will be live here throughout the day with plenty more. we will be talking about reforms and a little more about the banks. coming up, we will also be focusing on brexit and the supreme court hearing. we expect that to last two to three days.

that trigger article 50? this is bloomberg. ♪

francine: welcome back to "bloomberg surveillance." i am live from rome, looking at the referendum and italian banks. we just had two great conversations, one with the former finance minister, fabrizio saccomanni and one with carlo messina. matteo renzi believes reforms will stay in place, though he staked his job on the referendum. he would like somebody who knows the ropes, who has the

credibility of international markets, to be put in charge of the market. will this be padoan? we will see. there is a little but a follow from the referendum, but now it is looking better. here is mark barton. mark: investors are shrugging off the result of the referendum. look at the equity gauge in the equities calm. stocks are rising after falling earlier. the haven of choice is the dollar. all these currencies are falling against the dollar. bond yields are rising in europe today. gold, which was an initial 1% in was down by anticipation of that fed rate hike in the coming week. this is a difference between the 0 year. and german 1 the spread has narrowed from

almost 1.9%. today it is widening. its high is 1.79% and we are now at 1.69%. that is the difference in yield between the two. yields are rising for both the german and italian bond markets. this is a wonderful chart. it shows the euro going back to 2000 just after its inception. the red line is parity. the big question now is how long before the euro hits parity. now, the level to watch is the level from march last year, 1.0 496. that was the close in march of 2015. the big question is, as i said, when will we hit parity? forecasters surveyed by bloomberg predict be euro will be at one dollar or less by the end of 2017, up from november.

let's finish up with the ftse, the italian benchmark guage, which is up now by .4%. the worst performer of the banks, unicredit, banca monte dei paschi -- unicredit, the banco di polare. no sign of banca monte dei paschi. initially renzi through into doubt the lender's plan to raise as much as 5 million euros in capital by the end of the year. back to you. francine: thank you, mark. we are trying to understand the political fallout. we are in political limbo, but the banks have recouped their losses, and many of them are higher. let's get to the u.k. and talk about brexit. the u.k. supreme court, and of course, this is the government's

case on triggering brexit without going to a parliamentary vote. joining us now is the bloomberg news legal reporter. patrick, great to have you on the program. give us a sense of what has changed in the last couple of months. this case has just been getting bigger and bigger. there are various intervenors now. most notably, the representatives forrom the irish and welsh governments. her seniordown advisor to accuse theresa may of bypassing british parliament. francine: what are the judges, patrick, likely to focus on, very quickly? patrick: there is a big elephant in the room here, whether or not you can withdraw the triggering article once it has been.

the hard court judge has ruled that once you have triggered it, it is like firing a bullet froma a gun. if that is not the case, maybe they will not see things the same. way. francine: thank you, patrick. we will be back with patrick throughout the day in front of the highest supreme court in the u.k. coming up, more live from rome. we will be looking at the banks. we already spoke to the ceo of intesa sanpaolo, saying we should be seeing smooth action. after matteo renzi said he would resign because the referendum "no" vote received 50%. -- received 60%. this is bloomberg. ♪

renzi is going to resign a strong premised or who led in

important reforms, but i am confident he has the means to address this situation. reporter: the european commissioner there at the finance meeting in brussels. that get back to fran -- let's get back to francine in rome. what else are we expecting today? francine: well, we are expecting official resignation

resignation w resignation. look at what the next government and the composition will be like, but also the key reforms they need to push through. we will be looking at the banks and will be talking banks and will be talking to two former finance ministers italy. we hope to bring you more into the banking industry as well. this is bloomberg. ♪

affliction constitution

reform sweeps the italian primus to from power and pledges italy into political crisis. thanks in the balance in the wake of destitute by zusi on whether to go ahead with a 5 billion -- talks for the sale os diner unit. a pro-european independent feeds the freedom party in austria. vallsench prime minister is expected to make an announcement on his 2017 candidacy. good morning. we are looking at the political fallout of this referendum where matteo renzi says he will resign. tom keene is in new york. amazing to follow through the market reaction. a lot of the italian banks fell significantly first thing this morning and rome. they actually recouped a lot of the losses we are expecting the prime minister to go tend his resignation to the president and then the president will decide

who will form a government next tom:. what a weekend of international relations. marketsdrop is a surging to new equity highs. you see that in s&p futures. what i would suggest is as richard haas said at a council on foreign relations, they did not say no, the italians said hell no. francine: it's a little bit more nuanced if you speak to politicians and the little logs in europe. -- they said say no. does the party of matteo renzi still have the majority in the parliament? that is the question that will be answered. let's get to taylor riggs. taylor: the results of the referendum have rocked italy and the rest of the european union. prime minister matteo renzi says he is quitting after voters rejected a referendum he called to push through constitutional

reforms. the euro sent to a 20 month low. polls show of there is an early election in italy the entire euro five star movement would gain power. voters in austria has endorsed a pro-european path. they elected and -- alexander vander bellon. norbert hofer ran on an anti-immigration platform and . incated limits on eu power london the supreme court hears a crucial case on brexit today area prime minister theresa may's government will argue against having to hold a vote in parliament before beginning the uk's exit from the european union. a win for the prime minister would allow her to keep negotiating plans secret. global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. riggs.lor this is bloomberg. tom: thanks so much. equities bonds currencies commodities. we go back to francine in a

moment with louise easing alice -- luigi zingales. 84,futures, dow futures of really breaking out to new highs. euro way week. .06. we come back stronger euro over the last call at 12 hours. nymex crude holds above 50. 13 .31.s, dollar stronger through 101. german spread look at in a moment. here.the bloomberg yea a german italian spread. italy, germany tenure spread with the basic idea that down it goes. yields up. let's bring that up if we could. it's like a little monday. the surveillance gerbil is a little slow on monday morning. of the defeatgst

and over the last number of days we had improvement in that spread. here is a little bit of that. not all that big a move in the spread market off the no vote. francine: we are just getting some breaking news from the prime minister shinzo abe. this is on the back of him meeting with president-elect donald trump. he is speaking to one of the networks. we will get back to what the prime minister is saying and doing in japan. we need to focus on what happening and what people and of the bags are joined by luigi ingales. the populist parties were campaigning for no. was this a flawed reform? i think it is more like a flawed reform luigi:.

it is not a vote against globalization. even economists suggested to vote no. the first time the economists got it right. of forminga mistake a coalition against everybody and gave everybody the opportunity to jump in against him. necessary.t win a time.e would that -- he made a mistake. francine: i thought he had to do the referendum because he did not get the majority. luigi: the constitution of italy without twoapproved thirds majority you can have a referendum if more than 500,000 people demand it. people, the renzi people --why didn't renzi want to do that? francine: the government said

many times they had to go to the polls are it give me probability of the five-star movement coming in the power. it loosens the chance of that because they need to focus on electoral reform which of the moment would give a populist party a boost. luigi: i think the chances in the short-term are very low. the president is going to government. they're going to do everything to avoid that. i'm not saying this is right. this is what they are going to do. i think the outrage of what they're going to do now is going to create the setup for a five-star movement victory. francine: outrage coming from what? luigi: the way they're going to rig the electoral system. you're going to watch the review electoral system was created to make renzi or bella stony -- or berlusconi win. a system designed to make it impossible for the five-star movement to win. i don't think that is the way you run a country. you should have electoral law that is right or wrong independent of who is winning or

losing. this?ne: how do you see are looking at civil uproar and uncertainty? strike? luigi: it depends very much on what happens with the banks. referendume vote for a no vote toere's an economy that does not work. i've seen statistics that when employment was higher it was not always higher. a lot to do with the economy. the banking sector is really week in italy. renzi, think is -- i think his biggest mistake was to postpone resolution of the bank sector. we need to fix it one way or another. francine: that is one of the things i hear the most is that the priority of the government of renzi did not get the priorities right. that he was focusing on the wrong things. luigi: this is the beauty of italy. francine: when is a little bit

of wind on a rooftop, very good of a hotel but we are risking our lives in certain cases to bring you the very latest on the referendum. give me a sense of what the banks are going to do from here. in a fragile state. able to keep the city bike it we have seen so far? luigi: i think we need a generalized safety blanket. the problem with renzi government is they went one by one and i think the problem is generalized. i don't think -- would be able to do the capital increase amount that is a most impossible. something needs to be done. francine: i have like one million other questions for luigi zyng zingales. questionmillion-dollar , a keynesian light screen that fell on you.

if that was run by booth school and was more responsible economics that light screen would not have fallen. .uigi zingales this is truly extraordinary as you look at the 75th anniversary of pearl harbor . mr.abe will travel to pearl harbor to meet with the president. this will be on december 26 in december to what he seventh appeared over 2400 americans killed at pearl harbor december 7 1941. the president's historic visit to hiroshima. move, weets on the hope you stay with us. zingales with us now. dr. bremmer will join us in the next hour. this is bloomberg. ♪

tom: bloomberg surveillance on monday morning. local worldwide in europe, italy and across the united states. francine likewise in rome, i'm tom keene in new york. we need to look at the corporate world with our business flash. taylor: the army corps of engineers has handed a victory to protesters wanting to stop an oil pipeline in north dakota. the engineers refused to grant an easement that would allow the pipeline to be built under a lake or the standing rock sioux tribe and supporters of owner is --ued the project would north dakota leaders called the decision a serious mistake. developers can seek an alternate route. donald trump's election victory is boosting investment returns. trump's economic policies will sustain higher interest rates and a stronger dollar.

differences both should be a benefit to access balance sheets and earnings. we are back here in rome looking at the political fallout but also some of the opportunities for italy to grow after that no referendum came in strong. city percent of people saying they did not want this constitutional reform or the prime minister in an emotional and tearful press conference late last night said he would resign and we are expecting him to officially go to the president later today. zingalesck with luigi .nd giovanni orsina giovanni is one of the best-known and most accurate political forecasters taste in rome. luigi is the same. giovanni, give me a sense of how you see this referendum. was a populist win? we thought maybe it was not that it was just a reform that was flawed. giovanni: many components in the

vote. certainly the path was component, meaning that part of those who voted no voted no at a frustration with incumbent government. out of anger or frustration with europe, and for general reasons of dissatisfaction similar to those that pushed the britons to vote -- the british to vote for brexit and americans to vote for trump. as always there were many other components. part of the political establishment was against renzi. a renzi himself made many mistakes of communication and also constitutional reform was complex, not perfect certainly. understand forto citizens. francine: what comes next? a technocratic government? they get a vote of confidence from the parliament so they should not only be considered technocrats but whoever comes

next, with a hold? i think this is not unlikely because giovanni: renzi came out of the vote much weaker than we expected. this is not just a rejection for renzi, a massive rejection for renzi. renzi was the greatest enemy of any political government not guided by himself. what i do expect is the possibility of having a kind of caretaker government initially. but then this caretaker grownment might in time and last longer than we expect. we shall start with a measure of ambiguity, whether it is going to last a few months or 1.5 years. i start to believe it is more likely that italy is going to vote in 2018 rather than in 2017. francine: can you take that leap in saying we will go to general early elections? if we were to hold elections now wouldt mean democratico be a power?

luigi: it's true that this is a defeat for renzi but in a sense he got 40% of the vote by himself. everybody was against him. in a general election with 40% get a solid majority and when win the country. and referendum you lose. i don't know whether we're going to thousand 18 or 2017, don't think that makes a gigantic difference. think hopefully we know that by then we vote. sometimes there are doubts that votes take place. we will vote. whether we vote earlier now does not make a difference. this might actually be benefiting renzi. a caretaker government taking some unpopular measure like fixing the banking sector. then there will be an election in which he is going to run and going to run probably distancing himself from the caretaker thingment that did this

and probably he is going to come back. francine: i'm taking about 10 different steps. looking ahead to the future which may not happen. if there was a referendum today on whether this country wants to stay in the euro or not, what do you think the vote will be? giovanni: that's a very interesting question. , the momentum would be for a no vote. for a vote getting out of the euro. of course, it very much would depend on the electoral campaign. we have seen voters have become very fickle. but certainly, today there would be a potential strong majority for exit from the euro. francine: thank you so much. zingalesue with luigi from chicago booth school. when you look at the fallout,

what was amazing to me was the market reaction of the banks. a soon as we knew and the markets -- assumes we knew matteo renzi had lost the referendum the banks took a 5% lower each. they recouped a lot of losses and so the market is seeing either a signed stability or the fact that they were sold off too much before this referendum took place yesterday. tom: francine, in rome with more on dish with more with luigi zingales. talk about timely, a conversation with per venture -- blanchard.when charr ♪

tom: tom keene in new york, francine the clot in london. laqua.ncine th tourists from around the nation and frankly worldwide come to get there snapshot taken outside of trump tower. tickets to our morning must read. ask, is: i was going to this a new white house? i get asked this question quite a lot. as the white house moved to trump towers in new york? tom: every president has the right to sleep where they put their head on the pillow in this happens to be where mr. trump puts his head on his pillow. we will see in four months.

does terrificlson political economics. mr. samuelson says history matters, the often overlooked truth is that the u.s. economy, despite much rhetoric to the contrary is less globalized than virtually all other advanced countries. trade remains foreign policy. who we trade with and how our -- who we trade with and how are expressions of national purpose and power. professor zingales, i look at the new globalization of donald trump. how would you define that? luigi: that is a very good question. i'm not so sure we have a new globalization with donald trump. during the campaign he was very anti-globalization. the people he's picked so far in his cabinet don't seem to be very much against globalization.

i think there will be more rhetoric than substance. really fear i have is regarding long-term foreign policy. donald trump tends to be deal oriented. i fear that he might be sacrificing long-term benefits for the united states in exchange for some popular short-term deal. tom: the heritage of your university of chicago partly is jacob viner in a classic 1940's essay on mercantilism. you mention mr. trump makes deals. i get that. is this another form of mercantilism for america? atgi: if we start looking the carrier deal i fear it is. wascarrier -- the intention very good to save jobs in america but the ad hoc hurry of the way it has been done, the fact that it does not promote a

new policy that benefits everybody but gives targeted incentives and targeted fear. fear of retaliation. basically the dawn of a chronic capitalist tom: -- i look at the economics of donald trump and it tells me he needs advisors around him. do you have any confidence his advisers can massage the message? luigi: i'm not so sure. i don't have the confidence. rome and i look at look at all that is going on, how does italy folded the trump economics? the populism we see in italy has to make mr. trump adapt and adjust, doesn't it? luigi: i think the populists in italy is better than trump's populists. shere is no element of racist

in the five-star moment. most -- the biggest party of the opposition, the five-star movement, there is no element of racists. it is not even necessarily anti-globalization. i take the five-star movement populists over trump populists. tom: that's an important distinction. we will continue with dr. zingales, a conversational bloomberg markets with less move -- this is bloomberg. ♪

francine: welcome back to rome where we are looking at the fallout. opportunities possible from this referendum. matteo renzi shortly after midnight said he will resign.

we're expecting them to go to the president later this afternoon formally tend his resignation. we know he has asked all of the cabinets to meet right before going to see the president. i want to bring you some of what the various papers have said. trying to pour over them. a lot of these were published very early in the morning. the first one is quite right wing. saying renzi goes home. another one that i wanted to show you, basically a five-star movement paper. he says the constitution beat renzi 59-41. those numbers have been revised black andthe use of red makes it sound like revolution. i would say the two centrist papers, though this is a pro-renzi saying, the note triumphs.

a tearful mr. renzi giving his address next to the first lady of italy. very similar. it was very emotion. when you look at the rise of populism matteo renzi was saying it is easy to fight something. this was a message directed at the populist party. very easy to fight something. less easy, he said, to actually stand up for what you believe in. tom: is the five-star movement stronger this morning? because: it's stronger they were the ones campaigning together with other populist parties. the ones campaigning for the note. we can try to debate whether this was a populist vote or not. the five-stars movement basically won this referendum. thatthere to make the leap they would win a general

election. let's get straight to the bloomberg. taylor: we're going to start here in the u.s. on a trumped up in a series of early morning tweets. rejected criticism of his decision to take a phone call president.'s premises o the military buildup in the south china sea. china's official news agency says trump should resist calls for provocation on china. in oakland, california authorities say 33 people died in the fire at a late night party. firefighters expect to find more bodies in the ruins of the warehouse known as the ghost ship. of the 100 people may have been inside the building when the fire erupted. in the u.k. prime minister theresa may's cabinet has split over whether to pity european union for access to its markets over brexit. they's foreign secretary has declined to endorse the idea

that was set forward last week by maine's ministers -- by may's ministers. harborabe will visit pro with president obama at the end of the month. he will pray for the americans were killed at the hawaiian naval base. wednesday is the 75th anniversary of the attack on pearl harbor which led the u.s. to enter world war ii. global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. tom: thank you so much. that will be an extraordinary visit. i can't say enough for all of you worldwide, maybe for americans, certainly for the japanese but maybe for all the emotion of visiting the war remembrance of pro harbor, above the arizona which sunk on december 7 75 years ago. use from -- news from president

obama but of course the front .ine is on italy francine: we talk about political turmoil, italian politics in limbo. governments. when you look at the repercussions of this no vote, what does it mean for the democratic party, the party of matteo renzi? >> the important thing that is often forgotten is that part of the democratic party, the leftist part, was campaigning for no. this is not necessarily a loss -- really a loss of renzi. question is what is going to happen to the democratic party after this? will renzi stay head of the democratic party or not? i think he will. if he will not end the leftist

component of the democratic party will take over this is the .est recipe the leftist side of the party is hating look -- is hating the country. fantastic dad. if the democratic party goes back to being the leftist almost communist party, people prefer green low pay time. francine: when you look at what it means for mario draghi, an important eb's -- and important ecb meeting on thursday. they may have started talking about tapering this qe program. taper i think if they do it will be a problem for italy. the market is called today. i expect the ecb is buying a lot of italian debt. .s they did after brexit

qe -- the without toolkit available. a bit more complicated to trigger. qe the worldut would look very different. i hope this will continue. otherwise francine:francine: -- we talking about the banks as well. i cannot do this counter raising exercise. we need to make sure the -- little more flexible when it comes to bailout rules. luigi: i think the storm is such that it is very hard now to say we don't have a systemic crisis in italy. the last two conditions are in place. the banks pass the stress test

on the baseline scenario and they did. the second, there is a systemic crisis. -- able tons that raise the 13 billion that they want. with the banks that are in not say how can you this is systemic crisis? francine: germany in this case that would give a sense of approval or could italy do it by themselves? approved by somebody at the eu level. i think the conditions are ripe for doing that. especially if there is a caretaker government with the prime minister that they trust. i think they are more willing to go ahead and do that rather than let the country fall apart. tom: professor zingales, one of he realities is --

balance sheet expansion versus the size of the economy. bring up the chart if you would. here is where we were before the crisis and then you've got the u.s. action here and the japanese action here. really interesting point is the european balance sheet adjustment at the ecb is way ahead of the united states. do they have a sense that they are becoming japan like in frankfurt? luigi: i think it's important to make a big distention between europe and japan and the united states. japan and the united states do have a federal government. they do have the option of a fiscal policy at the government level. europe does not have a european government. draghi's really the only game in town. i think he is pushed to do much more that is -- that he is couple with. there is nothing behind him. tom: i look at this -- let's

stay with repressor zingales and we will drive forward this conversation. we will do it in the 6:00 hour as well. so much to talk about with ian bremmer, italy, china, and mr. trump asked fifth avenue -- mr. trump's 5th avenue. ♪

tom: bloomberg surveillance. in europe, in italy, glad you're with us this morning. in asia as well. lots of international relations. ian bremmer to join us. dr. zingales with francine in rome. the market reaction to italy.

where are you as many people is it a great-- reflation? >> where are you? i think it's a great regeneration of growth. i think we continue to focus on inflation but let's focus on growth. i think the stimulus plan president-elect trump is talking about is a shock to the system. we've see a lot of division returned from monetary policy and we need to start to see growth in tom: those our growth initiatives. howdy respond to people that say the market has discounted best discounts the future. brian: at the end of the day we remain so reactive. we have seen to much of a move in things like small and mid-cap and certain industrials. at the end of the day i think we need to start to see the fundamental realities of these things. tom: i want to talk about linkage to the bond market. thanks to all of oppenheimer funds.

david guerra and i visited friday. this is the amount of reflation we have seen in the five year deal of inflation. five years forward. brian belsky, we are nowhere near repricing to inflation. how do you link bond dynamics right now in the equity 401(k)? , wen: at the end of the day need to start talking about this great rotation out of bonds. the longer we see yields higher, we see some of our clients with respect to their portfolios start a seat negative real rates return. i think people are focused too much on this move. they need to see things kind of subtle in. things are not linear for a long time so we need to see -- i think december is going to be quieter. tom: i'll let you decide who it is. there watching the minnesota vikings. they are miserable. brian: the coach can't see

anything. tom: they are miserable if they watch vikings football. also miserable because rates are going up. cfos feel like the boat has left the dock on low yields how they respond? brian: they have to start spending money. i think that is part of what is going to end up happening with the semblance of tax cuts. at the end of the day people are missing what the platform is all about. at first i think with the platform is about with respect to less regulation -- tom: regulation takes time. brian: the question you asked before, how is the market discount, i think the market will get ahead of regulation forgets ahead of tax cuts because at the end of the day the regulation thing hits right away. margins go up some expenses go down. revenues and earnings can go up a lot faster. , 19,231 on the bloomberg terminal on the dow. i have been in the triple ledger

-- leverage -- it has worked out. with bloomberg radio this morning, carl weinberg will join us. high frequency economics. francine is in rome. the weather is better than new york i would think. ♪

francine: this is bloomberg surveillance. live from rome looking at the fallout from the referendum. a record turnout. almost 70% of the italians went to vote in this constitutional reform referendum. 60% of those that went to vote were actually for the no referendum. let's get back to luigi zingales , professor of finance and economy at the chicano booths -- the chicago booth school. -- it is the banks. recoup a lot of losses. what is the worst-case scenario

for the banks from this point onwards? luigi: the worst-case scenario is canceling the equity offering and they are in limbo. either the ecb is going to waive the role that they have to waive the capital by the end of the year or they even must be nationalized or must stop lending. i think none of this will take place. push come to shove the ecb will probably extend the terms. probably some intervention plan will come in. i think the market was anticipating this. the victory was not a surprise. -- of courseeople thisecond step is how decision will impact credit. this is the real thing. the sense that if unicredit cannot raise the amount of money it is tricky.

i was scared seeing a board member of unicredit writing on the main newspaper last friday that we need a government intervention. unusual that a board member writes an op-ed without saying she's a board member advocating for government intervention. in my view it as a sign of desperation. francine: is it right? luigi: you should ask unicredit that. if a board member writes that the government should intervene-- francine: we will try to ask unicredit later today. when you look at the political composition, if the next person succeeding matteo renzi is a finance minister and we have not confirmation but he is among the names touted, with the markets take it as a sign of confidence that it could be messy but pesky scenario as italy muddles through? luigi: italy tends to muddle through all the time. fantastic in the worst

situation. the highest moment in italy are the most difficult moments. i think we're going to rise to the occasion. let's look at unicredit. we like doing this off the bloomberg terminal, putting things in perspective. unicredit over the last number , we just nowto 28 going to retest these loans off the renzi shock so that will be worth seeing if unicredit can hold it up. i would ask a question i've asked 15 times before, what is the merger likelihood across borders in europe? what are we waiting for? think there are a lot of political obstacles to merger across borders.

so far there has been dis-incentivized by the national authority. the new supervisor of the ecb is very much afraid of a large merger. no large merger has taken place since the ecb took over the supervision of large banks. they are afraid to own the first one. terrified ofre merger takes place and then it blows up and then they own it. tom: brian belsky with us. we were talking about trump reflation, maybe it is global reflation, does that change m&a? brian: at the end of the day i think it empowers u.s. companies. tom: more confidence. brian: this is all about confidence from the consumer side but especially corporate america who -- as interest rates start to ship higher -- they are nowhere near normal it on a

relative basis compared to history they are still very low. the impetus to go back and buy back stock begins to lessen and mr. to do different things with their cash including and most importantly we think i'm a day especially in certain sectors. tom: within the m&a is the idea of the new american international bank. our banks international and are they different international? brian: i think at the end of the day the regulations that have been forced upon the us-backed -- u.s. banks have overcorrected themselves. tom: swiss like almost? brian: that's a whole another connotation -- that is another connotation compared that. in terms of how they built their balance sheets, how they have begun to pay dividends, how they will manage business is going forward. a scalable business model of the big u.s. banks we think are well-positioned for the next 10 years.

there and outperform or. we broke -- we would prefer the bigger banks first. regional banks will benefit from the economies in certain areas of country accelerating faster than others so the net interest margin trade. the big banks with scalable business models with respect asset management, the whole picture, are the best positioned. francine: going back to regulation, some of the italian banks but european banks in general. it donald trump deregulation wall street doesn't put pressure on regulators in europe to loosen up a bit? luigi: i think it will. ,s they were saying earlier european banks are different phase of the cycle. american bank overcame many of the problems of 2008 and 2009. i think many european banks are still there. the regulation at this moment in europe could be pretty dangerous. because i don't think they are adequately capitalized.

the french banks are not doing great. profitability wise they are not doing great. capitalize they're not doing great. still sort of a nonperforming -- is massivere deregulation would be dangerous. the supervisory function of the ecb loosen up a bit. i figure it will loosen up. reputationding the and itshoulders of italy is cheaper for them to build a reputation by trashing italian banks than by trashing german banks. tom: one final question quickly. when you travel back to chicago you're going to travel back to a different america. what will you look for from the new trump administration? luigi: i actually want to see

where it's going. i fear that what i described in my book, america drifting more and more toward chronic capitalist countries like italy is taking place. i hope to be wrong. fight to try to stop that. tom: thank you so much. dr. zingales from rome. brian belski will be with us and ian bremmer of eurasia group. this is bloomberg. ♪

tom: the italian people don't say no, they say hell no. renzi will resign following a

60-40 defeat. all eyes turned to frankfurt and mario draghi. let the stimulus continue. stock markets price in reflation worldwide. on a renzi zero world on italy, china and foreign policy in this hour, ian bremmer of eurasia group. we live from our world headquarters in new york. laqua.e .hat an extraordinary weekend what have you learned in the last 12 hours? [bells ringing] francine: the banks seen to be a lot more resilient. apologies for the bell that's ringing but we are quite close to the historical rome. it is time for lunch here. it is midday rome time. we saw the fallout from the banks because of political uncertainty.

we don't know who will form the next government. they've recouped a lot of losses which means that either the markets are expecting more from mario draghi or they are expecting the banks to be much stronger than they give them credit for last week. tom: your monday morning picture. time for lunch in rome. in two hours i will be at the third avenue mcdonald's having a number to value meal at 11:15. taylor: we are sticking with italy. the result of the referendum have rocked the country and the rest of the european union. matteo renzi says he is quitting after voters rejected a referendum. eventually sent the euro turned 20 month low. polls show if there's an early election in italy the entire euro five star movement would gain power. voters and austria have endorsed a pro-european union path. they elected former green party leader alexander vander beland

as president. he defeated norbert hofer. hofer advocated limits on eu power. in london the supreme court hears a case on brexit today. theresa may's government will argue against having to hold a vote in parliament before beginning the uk's exit from the european union. a win for the prime minister will allow her to keep her negotiating plan secret. global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. i'm taylor riggs. tom: breaking news. we expected this. dr. carson will be the hud secretary nominee for donald trump. dr. carson at emory, johns hopkins and was a presidential candidates. ben carson as we move on with

the transition team. we want to get a doctor bremmer lski.r. be a little bit of market movement. we moved to 13.26. we need to see 11 handle for me to see rational exuberance. italian spread widens out maybe less than people thought of. to the bloomberg to give you scope and scale on francine's italy, the idea of italian german spreads and the little blip on the right hand of the screen. maybe that is an indication of quieter markets than what you see the historic politics of italy. you've got that beautiful montage of newspapers in italy. francine: i do. when you talk about a historic

referendum you are right. as luigi zingales tells us italians are usually resilient. the come out there best when it is a mess politically. let's see if that holds true. prime minister renzi will go to the president later this afternoon and tender his resignation. it'll be up to the president to name a new government, someone who could actually form a coalition. i have four papers for you of different spectrums of politics. i want to start with -- i was reminded that this was not the spokes paper of the five star movement but they do agree with -- they have told him know for certain things. they say the constitution beat renzi 59-41. those numbers have been revised to 60-40 and he resigns. quite dramatic in terms of that front page because it is black

and red. it looks little revolutionary. this is a more centrist paper saying the wave of no, renzi leaves. in every front page there is a quite emotional prime minister. mainly supportive of the democratic party, renzi's party next the first lady of italy. pretty emotional to hear at 12:30 last night the prime minister actually reside. he said -- actually resigned. he said he thought he would win not.and he had something that makes record with populists across europe. he said it is easy to fight against the establishment. he believes it is more difficult to actually propose what you believe in. this is more of a right wing journal saying renzi goes home. that pretty much sums up the political class. we know the five star movement has called for early general

elections. .om: brian belski with us thrilled to have the time of ian bremmer of eurasia group. we did talk for five hours, what does italy mean, what does it mean for chancellor merkel? another self-imposed and goal as we saw from former prime minister cameron in the u.k. renzi comes in, feels pre-strong and thinks he is the guy that can drive a reformist wave and effect we hoisted tom:? is this politics by ego brian: a little bit ian: -- ian: a little bit. i think renzi has done an .ffective job reforms italy greatly needed. it would have helped the economy . this is back to the status quo in that regard. tom: what does it mean for chancellor merkel? metal guard was at bloomberg -- madame lagardere made it clear there is a new europe. what does this mean for angela

merkel as she drives europe to 2017? ian: there is no more force other than merkel for stronger tighter integration of the eu as a whole. obviously the transatlantic relationship, which is the most important in underpinning us-led globalization, has been decisively repudiated by everything in europe over the last year as well as what the elections we just had ree weeks ago. merkels very likely that gets another term as chancellor in germany. problem is her ability to lead is constrained. tom: brian belski is an expert on equity markets. he's been a confirmed bull. we have a new reflation from mr. trump and others. will that widen the gap you study in international relations of political economics? ever front apart by the

working-class people of francine laqua's genoa? ian: no reason to believe that populism is losing momentum in europe right now. it is constrained in germany. but two establishment parties have been taken out of the map. if you ask me what is driving it it is identity politics in concerns about immigrants and refugees and it is not going away. tom: your corporate officers drive your world. do they care about doctor bremmer's world? brian: sure they do. one of the most important things dr. bremmer talked about is how merkel is going to tighten up the european union. that probably needs to happen because what we need to see is structural fundamental reform in europe. up thes able to tighten constraints of what is happening in europe there's a better chance to see reform. all we have seen to date is monetary policy. we need to see these companies cut costs and reform themselves. tom: a big oil company, 5.6%

dividend. is europe the often at -- the ultimate -- never winter in rome. at the end brian: of the day to facilitate that dividend we need to be of the sea cash flow and i'm not convinced that a lot of these european countries can continue on the cash flow front to pay those types of dividends. at the end of the day cash flow is being used to grow. we'd be up to grow and expand the cash flow and given constraints with respective business and increasing regulation, it is going to be difficult for a lot of these companies to continue to grow period. if you look at france and italy do you think the civil citizens of these countries are pro-euro? ian: i think in both france and italy right now you have populations that are moderately pro-euro and eu but those numbers have been going down consistently. there is little to be behind. you see that europe as a

construct right now is failing. the reason that you put it together was not just to have a common currency but common values. to bring these countries together to create a super national identity and create some level of loyalty for governance that was above their individual countries. that is obviously breaking down. you saw that with the surprise illon over sarkozy and renzi,nd you see it with incapable of driving some level of strong leadership area brings it is overwhelmingly the big story here. everything else a small change, in part because of how big it is for them to leave but also how much traction it will take from every other political story for years now. the ability to drive proactive political governance in europe that would make the place look like it is run better, that is so far from the agenda today.

francine: can we really say with certainty that this referendum -- this bill vote -- this no vote is an antiestablishment vote. renzi is hardly establishment. was it not a confusing constitutional change and just meant that the government was focusing on the runtime for reform? ian: i think it is anti-a leader that got over his skis. he originally made this not just a referendum on politics in political reform. they were offering out lessons on unpacking the reform. 145 euros an hour. people did not understand it. they didn't know this was something renzi wanted. to popularity has slipped horrible levels over the course of the past few months. the fact that he said this is no longer about me, it sort of is about me, back-and-forth. his ability to get what he wanted.

people have found all over the developed world that they don't for for policies, they vote for leaders and support the policies of the leaders -- that the leaders they like actually give them. that is how renzi went wrong. he could not maintain the support of the italian people and he did not lose small, 60% with 70% voting. tom: let's continue on. we will have ian bremmer talk on the neutral foreign policy. an extraordinary weekend. on bloomberg radio and bloomberg television this morning. ard.essor blanchett this is bloomberg. ♪

tom: every warm body in view of washington dc is getting a twitter account. that seems to be how we will do things. google could ian bremmer in a moment on our new foreign policy. a more prosaic matter, kevin cirelli, what a weekend it has been. do you just presume that there will be an indianapolis follow-up for the president-elect questio? is that just anyone of a nine inning corporate bashing game? the trumphink it is transition sources i'm speaking with our indicating that they will be talking to even more businesses. ford, the latest company to indicate that they will be waiting to see what president-elect trump's policy will be, indicating that they are willing to work with him. what a remarkable weekend in terms of foreign policy. on saturday we reported

exclusively that president-elect trump is close to nominating iowa governor terry branstad to be the u.s. ambassador to china. a lot happening with the trump transition team's relationship with china. tom: as the ballot goes on, i was standing outside on fifth avenue -- let me tell you it is some thing to observe. the trump tower. is he listening to his advisers? and on corporate america is he possibly listening to wilbur ross, his secretary of commerce nominee? kevin: he is. in addition to that he is also speaking with folks like steve mnuchin, his nominee for treasury secretary. weekend,ome over the met with gary cohn from

goldman sachs. he is assembling a team of economic advisers working to push those deregulatory financial policies. a lot of questions remain to be seen in terms of who will fill out the remainder of his cabinet , especially with that secretary of state pick. couple of minutes ago the team formally announcing dr. ben carson to the housing and urban development secretary position. tom: thank you so much in washington this morning. brian belski with us and ian bremmer. other than this being the bremmer eurasia group employment act of 2016, would you please synthesize for our viewers worldwide foreign policy by tweet? i just don't buy it. policy.s not foreign about is what kellyanne conway and others said immediately. he was not trying to set policy with this tweet. that is true. i believe that by putting out whatever is on his head he does not think that that is going to constrain him in the future.

it's different to send a tweet out as president-elect that it is as a human being campaigning and he has not figured out that transition yet. some countries will not pay much attention but others will take advantage. -- at that chinese point their view was trump is a blowhard but he is a businessman . they will be up to work with him transactionally. tom: making deals etc.. that change over the weekend? ian: it absolutely changed. the fact that taiwan has become a significant issue -- no present or president-elect since 1970 nine has engaged directly with the taiwan president. if you talk to xi jinping the one place you will see that there is a complete redline that they must react that is a problem is taiwan particularly this new nationalist government. any movement that looks like they are trying to gain independence/sovereignty -- tom: you mention redtom: line or lines in the sand, do

you see any foreign policy police assisting the president elect towards a more president took character? is there an adult in the trump tower? ian:. not on foreign policy -- not yet, not on foreign policy. i see a worldview and people that are put together who like each other. on foreign policy it is not as much of a priority for trump. he does not have the expertise or background in the team around him is weak and different views. having a secretary of state will make a difference but i do not know it is a sea change. what is it mean hearing this discussion partitioning economics from foreign policy? brian: given the week we have seen in gold it's probably time to buy more gold. at the end of the day i think there will be volatility. higher volatility and lower prices with respect to europe. in terms of the u.s., you have to focus on the sectors that will benefit the most.

we think financials, industrials materials and health care but especially financials because the 15 europe bull market of compliance we think is over. as the cost structure of these companies will go down. tom: thank you for starting ourtom: monday. client -- brian belski withbmo capital. we will continue with dr. bremmer. all sorts of things coming up. later, a conversation with a former governor of utah, a former presidential candidate, jon huntsman. this is bloomberg. ♪

>> absolutely the right person. absolutely the key point of success if you want to lead the government of a country in which you are spilling outperform, growth in gdp and all the other items that are key in the success of the government. messina: that was carlo talking to me a little earlier on about the caretaker government. if you speak to former caretaker governments, the finance minister of the prime minister, they will say we had a vote of confidence, whether the current finance minister will be nominated or not, we will have to see. york with ian new bremmer of eurasia. no matter who becomes prime minister, caretaker in charge of this caretaker government, what

should his or her priority be? ian: one thing they have to get reform.parliamentary that is on the agenda. they have a budget they have not finished for 2017. that's extremely important. of course, they have to respond to the weakness in the banks. these are all small ball issues. the idea that you're going to fundamentally streamline the .talian political system that is very much off the table. even though there won't be snap elections this is the last time for the for see able future that you're going to have strong governance by a single party. renzi is not gone. it would not surprise me if you still party secretary. whether or not paddle on becomes -- i think is going to remain to his present role as finance minister. there is going to be continuity. italy is going to be receding back to its previous role, lots of very weak coalition

governments that are very relevant on the european or global stage. weaks just a show of how europe was and how strange the eu crisis were by for a brief period of time it was renzi and merkel that seemed to be the room. in the in that regard we are going back a little bit to the status quo. tom: i want to talk about china but i want to talk about what the five star movement does in italy as they have the mayor of as well.other locals futures at record levels. jeremy siegel of wharton, this is bloomberg. ♪

tom: and now for "surveillance" reality. there is a view off our set in new york. let's go to francine. there, the difference -- new

york, rome. the pictures say so much more than words ever could. i am tom keene in new york, francine lacqua in rome. we should go to bloomberg "first word news," and here is taylor riggs. taylor: with italy, they have fallen into political limbo. matteo renzi is resigning after voters rejected a constitutional reform referendum. that could open the door to the antiestablishment five-star movement, which is running neck and neck with the democratic party in the fold. the e.u. commissioner spoke to bloomberg about the italian vote. the italian politics, italian constitution -- mr. renzi is, was, because he is going to ride that he is going to resign as a strong prime minister, but i have confidence that italy is going to address the situation. back in the u.s.,

president-elect donald trump will mom and a former republican presidential candidate ben carson to be the secretary of that will nominate former -- will nominate ben carson to be the secretary of housing and urban development. engineers refused to grant an easement to allow a pipeline to be built under a lake. 's leaders called the decision a serious mistake. developers can still seek an alternative route. japan's prime minister, shinzo abe, will visit pearl harbor with the president at the end of the month. he says he will pay for the americans killed at the hawaiian naval base. wednesday is the anniversary of the attack on pearl harbor, was

led the u.s. into world war ii. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries, i am taylor riggs. this is bloomberg. tom? francine? taylor, thank you so much. let's get more on the italian referendum. we know matteo renzi will go to the president and resign formally this afternoon, and then it will be up to the president to choose an interim government or new prime minister. let's talk about the impact on businesses. to theeased to speak director general of the italian association. what does this mean for italian business with the fallout from the referendum? course, there will be a moment until the president decides who will govern italy.

-- we're confident that the as far as the reform is concerned, of course it is a referendum had such -- nonetheless, we are very much confident that italy will reformsgoing on with and will keep from being very much engaged in economic reforms with economic policy which is going to support business. francine: to make sure the reforms continue to be pushed through, how important is it that president matter relevant choosesthe president someone who will support international markets? i cannot say that prey the most important thing is that

who will govern italy will be a courseof ability, and of the reform process that italy needs. but from that we really care about content and not about political parties. is itne: how important for your members that the banks are dealt with? they go to the testament of investor, hope for italy or not. they also use this to get lending. marcella: you know that italian companies mostly depend on bank trading. it will be solved in a short time. francine: should the previous government, the matteo renzi government, have focused more on the banks? instead of constitutional reform? there are two issues that are interconnected.

if you do not have conflict between regions and the state, you have a better working economy, and the impacts on whatever sector -- also the banking one. banks.ernment dealt with they are trying to adopt some measures, saying that the banking reforms from one point it is not easy to assess at the moment because we are still in the middle of a process which has got to be defined. .ut hopefully it will francine: thank you so much. we have spoken to a lot of the main players in rome, and it is very clear when you speak to a general, the director

what the business community wants is some kind of stability, some kind of continuity over what they say are the reforms that the last government, matteo renzi's government, put in place. tom: we will continue. ian bremmer, still with us. this is a depressing chart. it is the failure of a european experiment. this is the moving average of italy's animal spirit, nominal gdp. this experiment is not working, is it? 37% youth unemployment. ian: it is the issue of the social contract between the government and the people no longer -- eurasiat is the band-aid on this? this is the problem. the countries that you want to see as strong in driving

democracy as a model for the rest of the world, driving free markets as a market for the rest of the world -- what are those countries? the european nations, the united states. they are incapable of doing that from her own citizens, so how will they do it for anyone else? a conrad at an hour to save the day? ian: consistently the strongest adult in the room for all of europe, and increasingly for all of the free world. her response to trump's is election was not get on a plane and give him a golf club, it was we are going to work with you but we are going to work with you if you continue to support the values that are critical to the transatlantic relationship. that was the right message to send, but she is doing it by herself. within challenges from her own coalition, and she has plenty of problems to worry about. tom: this is the great message

here, the aloneness of ian bremmer's world right now. we will continue with ian bremmer, speak to him on china and the events of the american foreign-policy weekend. tomorrow on the show, mario gabelli. look for that on bloomberg radio and we will do that tomorrow. this is bloomberg. ♪

francine: this is "bloomberg surveillance," live from rome, where the prime minister was calling for the citizens of italy to vote for a yes vote in his reforms. it was a resounding no, 70% turnout. that is quite a big turnout. 60% of those voted no in the

referendum. he will tender his resignation. and we have this headline coming from the italian news agency, a very respected news agency with strong links to the government, saying that the prime minister, meteo renzi, has already with the president. we do not know whether it was just a preliminary talk and then he will officially hand in his resignation. and then the president will form a government, who he thinks will get a vote of confidence from parliament. it is not necessarily want to be part of that transition. we do not know yet. tom: is anyone celebrating in the streets? ofy to city, the strongholds five-star, the strongholds of southern italy -- is there a celebration? am, from there i rooftop balcony, no one is celebrating.

but we know the head of the five-star movement is celebrating. one of the first victories of his movement -- he likes to call it a movement -- was to relieve in mayor of rome, who won april. he wants a general election asap. i am sure he is celebrating, trying to rally the troops. tom: we will continue from rome and new york. here is taylor riggs. royal bank of scotland will pay up to $1 billion in federal litigation over shareholder rights issues. say rbs made untrue and misleading statement. the bank is talking to a home -- to other shareholder groups to so it'll -- system -- to settle similar claims. according to the wall street journal, the compensation threshold will be raised to pay brokers by 10%.

it is part of morgan stanley's cutting of a billion dollars in annual costs. that is your "bloomberg business flash. tom: coming up surely on "bloomberg daybreak: americas," jon ferro, david westin, and alix steel. what will you decide this morning that what will you do this morning based on your italy? a caretaker government is taking over. the muted market reaction -- btp selling off, but he euro-dollar round-trip is a big unknown for me. that is going to be very uncertain going forward, and rather counterintuitively, i have to say this makes it a lot harder for the five-star movement to govern authoritatively because the electoral law needs to be reformed. maybe they would not have the power that they would have had when we got a yes, and then we will have an election. we will continue to have a business discussion about telecom italia.

tom: thank you so much. now to rome, francine lacqua and in bremmer. at 1.27.ing was francine: we're talking about a wave of populism. let's go back to brexit. the supreme court will meet today about what we heard from the high court said -- theresa may and her parliament can invoke article 50 after having discussed it with parliament. that is extremely important. i do not know whether it is likely at this point that the supreme court will reverse the decision of the high court, so let's go to our export in new york. ian bremmer, from eurasia group. is it unlikely that the supreme court, in the most high-profile supreme court case in the u.k. in modern history, will go

against something the high court has decided? ian: it is certainly possible. it is an unprecedented case for them. more important than whether they reverse it is if they decide to up it, how they do so. if all they need is a nominal acceptance from parliament to go ahead with the invocation of article 50, that is not a big deal. it can be done quickly. you can get that trigger clause by the end of the first quarter, which is what prime minister may has been saying she wants to do from day one. it is also possible that they actually say the parameters for that have to be specifically legislated for parliament. there was a specific ruling from parliament on getting into the you after all. that could not -- that could lead to some guidance from parliament, what kind of a brexit it is going to be. it makes them an active player. that would require a lot of time for parliament to do that, and engage critically the soft o-e.u. -- thee

arrow-e.u. remain cap. pro-e.u.-remain camp. you could force her in that environment to call early elections in the u.k. there is an enormous amount of uncertainty on both timing as well as what brexit actually looks like on the basis of this supreme court ruling. anyone that is dealing with brexit should have palpitations around that, it except that since it is far enough out, the markets are less worried than are about everything else in the headlines right now. francine: you were going through some of the merits, possibly debating parliament. do you believe by debating brexit, soft brexit, hard brexit in parliament, it would give the e.u. an upper hand? say i am not sure i would

an upper hand. the question is how much longer the look of confusion goes on. at some point you are going to get the european leaders to be increasingly agitated by the fact that they have to spend so much time being distracted by this issue. we could get to a good place on brexit. you could even go sector by sector in terms of where there are challenges on immigration, where there are challenges on market access if you had technocrats with economic backgrounds sitting down, not politically distracted, saying let's make this work. we could have an outcome that would work from both sides. the problem is that politics are inserting themselves within the e.u. as well as what is in the u.k. they will do so with lots of campaign cycles in the interim. that is a disaster for the u.k. the fact that there is such a dysfunctional level of politics with a supranational organization -- it does not work well for the u.k. tom: let's pull up this chart.

there is brexit, june 23. the punch from the 1.40-plus level, down to 1.30. down we go, and then we recover. what does mr. henderson say about sterling dynamics? are it is the fact that we not in a brexit environment right now. we put our top risks out every year. tom: that was a surveillance shameless plug. ian bremmer out front, the first of the year. ian: i apologize. it is not clear to me this brexit is a 2017 risk at all. it is a much longer issue, right ? that is something we had to deal with. and i think the british markets and sterling right now are acting as if we do not have to worry. , we willbremmer continue with what you want to hear. ian bremmer on china and mr. trump. the president-elect with an

active weekend. for those of you in the markets and the media, must-watch, must-listen. let's go to cds. look for that this afternoon. ♪

francine: this is "bloomberg surveillance." we are live from rome the day after the referendum, record turnout. perc voted no. we are looking at the political system. we are looking at market the markets opening early this morning. the banks were down 3% to 4%. they have recouped their losses. there will be an appointed prime minister, and they are hoping hoping thatey are person's steady as she goes. or they look to thursday or to what the ecb will do, and they believe there will be no talk of tapering because they need to deal with business.

tom: let me get to the forex report right now. a lot going on this morning. the banks are on the move. what is stunning looking at euro up to 1.07 -- like the trump victory, completely opposite the doom and gloom people would have expected. euro-swissie, and a weaker swiss franc. weakermentioned a turkish lira this morning. we want to talk with ian bremmer about china. .u.d., maybe dr. carson talks about it. you lived with it. america? hud do for ian: this determines that people -cost quality housing

when people cannot afford it. carson does not have the experience to -- i thought to myself, that is the right kind of guy. he recognizes -- he was selling his book, getting his facebook numbers up, but he knows he cannot be a cabinet secretary. to the have to move on weekend's festivities with trump in china. are we pivoting? we are pivoting to twitter. will we pivot in china? ian: it is hard to imagine. if you wanted to pick a fight with china through the tweets we , you also want to shore up your relations with american allies. for example, the trans-pacific partnership, the thing that all of they want and that they cannot count on anymore -- i have been meeting with the governments in that region, and they all are looking at the u.s.

and saying it is a disaster. tom: you work at tulane and stanford. what is the price or process of isolationism. what is our history when we choose to be isolationist? ian: there are lots of reasons to be isolationist in the united states, in the sense that so many of the big geopolitical problems do not wash up on to our shores. we saw that before world war ii, and we see that with refugees in the middle east. we see it with terrorism and isis. but certainly american allies matter, and american standards and the american markets matter if we want to do well. the fact that someone like trump comes in and says our companies do poorly because of china's currency manipulation -- our company's are doing business in china. will travel to the harbor what does that signify? ian: it says to me that the

closest ally that the trump administration has is probably japan. they do not have to worry about populism internally, the blowback. trump is supporting the nigel europe.in that is a threat to those markets. in japan, there is a one-a system again. shinzo abe does worry about china. he is the one going to pearl harbor, meeting with trump. that is an important relationship. tom: thank you so much. tomorrow, francine lacqua from rome. really looking to the continuing discussion, the effects of the matteo renzi resignation. this is bloomberg. ♪

jon: the morning and welcome to "bloomberg daybreak."

i am jonathan ferro, alongside david westin and alix steel. in italy, it is political drama but without the market turmoil. futures positive. equities gaining across much of europe. if you look at the bond market, the ecb is lower than expected. but the euro stronger. up against the dollar by a third of 1%. alix: the crushing defeat. renzi-- italy's matteo announcing his resignation. muted markets, the european stock gained after coming back from a 20 month high despite renzi'. and trump accused china of currency manipulation on twitter. david: let's go back to the italian referendum. we are going to milan. dan, the first question -- we know what happened. the referendum went