francine: it is trump time. the president-elect takes office eight hours from now. what will the next four years old? george soros calls trump a con in and would-be dictator but an exclusive interview, he says the new president will be kept in check or the u.s. political system. janet yellen backs a strategy for gradual rises and insist the fed is not behind the curve. this is bloomberg "surveillance ." day four from the world economic forum. tom keene guest hosting.

it is inauguration day. so early in the morning. alreadyre is i amendments to it, things in washington that are so different than anything we have seen in our lifetime. and many people would say pretty much within the modern political ear. it will be different today in washington. nrancine: like it's bee different for the last six months. a busy show from the u.s. treasury secretary and the harvard present emeritus, larry summers. then the riksbank deputy governor. secretaryato general. let's get to bloomberg first word news. donald trump has promised to unify america as he prepares to move into the white house. speaking on the eve of his

inauguration in washington, he vowed to carry out his campaign wages to harden the borders and strengthen the military. mr. trump: it is a movement that started and it is a movement like we've never seen anywhere in the world, they say. there's never been a movement like this. and it's something very, very special. and we're going to unify our country. and our phrase, you all know it, half of you are wearing the hat. "make america great again." nejra: george soros has called donald trump "a con man who will fail because it's ideas -- his ideas are contradictory." he warned that the stock market rally since the election spurred by the president-elect promises to boost spending will come to a halt. george soros: right now,

peak.ainty is at a and actually uncertainty is the enemy of long-term investment. so, i don't think the markets are going to do very well. right now they are still celebrating, but when reality comes, it will prevail. nejra: janet yellen has backed a strategy for gradual raising rates. the central bank has not been behind the curve but admitted it cannot afford to let the economy run too hot. yellen said fiscal policy is one of the many uncertainties the fed has to deal with. hasu.k. prime minister offered her stronger support yet for the city of londona as brexit moves closer.

her comments, as large banks prepare to move staff abroad after the u.k. leaves the e.u. value financialav services and the city -- and global britain will do just that. nejra: global news 24 hours a day powered by 2600 journalists and analysts in 120 countries. this is bloomberg. you so much.nk we have been looking forward to this interview for three days. i was lucky enough to have lawrence summers, former u.s. treasury secretary, on a panel. tom: a very successful panel. francine: thank you so much for coming on. we spoke to george soros. he said this next year will be disastrous, part because he is hockin ghis book. lay out for us what president

trump means for america and the next four years. mr. summers: there it hard to know. i think the risks are greater than many people suppose. biggest breaks are probably not in the economics area. biggest ricks are geopolitical --biggest risks are geopolitical with huge provocation vis-à-vis china and the unprecedented allies withour nato the soviet union with challenges to something that has been at the centerpiece of american for policy -- support for european unity. and with unpredictability vis-à-vis the volatile middle east. i think there are big risks in that area. big risks in terms of the approach that is being taken to american democracy, the extent to which our new president is engaged in demonization of particular group slick muslims, like muslims, the

extent to which she has called into question the traditional rule of law with ad hoc approaches to making demands of individual companies. all of that is i think a cause for concern it in the economic area it is hard to know. my judgment has been that the current wave of optimism is something of a sugar high, and that before long, the consequences of the strong dollar, of substantial policy uncertainty will be felt in markets and economic growth. that is a judgment can francine: i keep being told he is a businessman. a businessman does not want to trade war, unless it is a negotiating tactic. mr. summers: i have been very troubled by the attitude of business people from the united states here in davos. e months agowo-thre

were saying he was a man they would never do business with are today hailing him as a great economic statement. tom: he's 100% right. it has been stunning the turnaround. people who were terribly afraid of what this would mean for america's place in the world are now hailing those who surround -- hailhail those around donald trp as great geniuses. you know, every time you look at some kind of moral disaster, whether it is a bully on a playground, whether it is what , europe in theon 1930's, the key to it is that there were not the people that did wrong. goodey to it as that people went along and did not get in the way. i see a very disturbing tendency

to enable whatever the instinct of this new administration is. i think that's something that overtime the business community may come to regret. tom: in the generous time we have are you this morning, the historic day for america and the global economic system, i want to take you back to the work of paul's our unlcescles, samuelson. it change the word. if you handed samuelson to the president of the united states, which chapter should he read? mr. summers: i don't think mr. trump's problems are what he does not know. it is the things he knows that aren't so. tom: give us one idea. mr. summers: it is the conviction that mercantilist protectionist economics somehow

drives prosperity, which i think almost all economists i would agree is a confusion. it's the believe that somehow you can base a capitalist system not on rules but on individual ad hoc deals. i think that is another substantial thing. tom: what will be the ramification of a neo mercantilism, we hear from wilbur ross, hear it from peter navarro, what will be the outcome for the diehard trump supporters that were at the lincoln memorial yesterday and will be at capitol hill today? mr. summers: ultimately their incomes are going to be lower because they will be playing higher prices for the products they buy. ultimately, they are going to be poorer because of a cycle of protection that is going to weaken the global economy. and ultimately, the consequences of all this, once it works

through exchange rates is going to be exactly the opposite of what is hoped. think about mexico. yes, he had a conversation with a ceo and a few hundred jobs got preserved for some interval. at the same time, the mexican that means 15% and for anyone considering locating business in mexico or ohio, mexico now has a new 15% cost advantage. so, think it is all going to be very counterproductive. francine: what are the checks and balances? will it be congress, or will it actually be the constitution, or will it be the markets and the high dollar? mr. summers: i hope it will be some combination of all three. theuld have hoped that business community would have be en, and the sentiment of the business community -- and the business community is hugely respected in america and has

substantial influence in congress. and i would have hoped that the business community would have been a substantial moderating influence, but after seeing davos, i now have much more doubt about that. francine: the problem is that it is easy for them to see the elite is out of touch. mr. summers: i do not think that is the key to this. i think the key is whether they where medium term view their success in america success go very much together or where the they're so mesmerized by the possibility of a tax break in the next -- months, that they lose sight of their longer-term interest. francine: the trump tweets. minutes, $1.3ive $1.53n of market cap -- billion. is that why they are afraid to

speak up? mr. summers: that is part of it. i think part of it is that our rhetoric coming out of the administration that's more celebratory of business. they have legitimate concerns about excessive regulation and in the previous administration, i always have said for years now, that confidence is the cheapest form of stainless. retrospect, more could've been done to promote business confidence. it's a complex thing, but i do not think any of that justifies the kind of enabling of what i think are quite dangerous policies, practices and rhetoric, that i think the business community has been engaged in. tom: i want to go back with your ther on "time" magazine, common ground between summers economics and economics of john taylor at stanford university, which is dollar dynamics are smooth and in control and the elites have control of those dynamics and then they unravel. you mentioned mexican peso.

against theto one u.s. dollar. are we near a point where those exchanges is the litmus paper of a system suggest we could unravel, or does this president have room to move to learn on the job? mr. summers: you never really know. things are stable until they are not. to that is one seeking encourage volatility, that's why imprudent administrations, the custom has evolved that presidents do not make casual commentary on currency, on currency values. i think there are risks. i do not know what the imminence of those risk is. i think anybody who tries to say there is going to be doing going tomorrow for sure -- doom and

is making aow mistake. i would be the first to recognize there are substantial uncertainties, but i certainly also think we are taking risks and our new president is being enabled in that risk taking by to normallyne looks to be appropriately cautionary. francine: it was stephen mnuchin in his hearing saying that we should call china a currency manipulator, or do we need to be more subtle in our dealings with china? mr. summers: if china manipulates its currency, we would be right to call that out. sentient observer of what is going on now will recognize that china is spending huge quantities of reserves and engaging and very substantial controls with the objective of preventing its currency from falling. so, the suggestion that somehow china is driving its currency down for a competitive advantage

was a sensible thought and a reasonable analysis years ago but makes almost no sense in the context of this moment. tom: help us with the emotion that you created with bloomberg days ago ofe" 10 speaking of economic creationism. that is a loaded phrase. define that further and define how the people around mr. trump can help them towards a more traditional economic analysis? mr. summers: well, i used the term to refer to a paper that was written by two apparently central figures in the trump administration, wilbur ross and peter navarro, that would be the kind of example of, one would give on a freshman exam of an economic analysis. tiitsssecting correct in suggestion that anything that

reduced imports increased the gdp which is a ludicrous suggestion. that climateay denial violates science and in the same way that creationist science violates what we know equalbiology, this is an level of fallacy. what willat is ultimately drive policy in this administration remains to be seen. francine: what are the chances of a trade war between the u.s. and china? mr. summers: the chance of a cycle of protection and retaliatory protection has to be as high as it's been anytime in the last 25 years. and there certainly are real risks. francine: 50/50? mr. summers: i am not going to handicap beyond saying that it's needs deal higher than it to be. and it seems to be that some statge has been set for

imprudent action. what the new administration will actually do, i very much hope they will decouple the taiwan issue and the trade issue, because i think that linkage is unsound. i hope they will pursue legitimate u.s. commercial interests in china but do so in a prudent way. tom: very quickly, this is so important, secondary kissinger will speak today to this davos audience. he wrote the book "world order." is this a new world order with president trump? mr. summers: it remains to be seen. as i said, what will happen, i am concerned the united states it may or may not have been theistic as was common in clinton administration to refer to god's states as the indispensable nation. refer to the united states as the indispensable nation. almost everyone would agree that

the united states -- given its strength has done a lot to underpin a global system. a global system that, for all the problems, has done very well and the 70 year since the second world war. i think we are seeing more risk of the united states abandoning that role than certainly any time i have ever observed. francine: thank you so much. larry summers, the former u.s. treasury secretary. now, coming up today, you all know on bloomberg, we will bring you special coverage of donald trump's inauguration as the 45th president of the united states of america from 3 p.m. u.k. time. next, we speak to australia's finest minister. we'll be asking about donald trump and commodities. this is bloomberg. ♪

francine: this is bloomberg "surveillance." here in davos. let's get straight to another great interview. he is the finance minister of australia. thank you for joining us. we are couple hours away from donald trump being inaugurated the 45th president of the united states. what does that mean for trade, are you concerned about tar iffs. also you has been a strong and reliable friend of the united states. confident we are very that the trump administration is

going to be very focused on that america is a strong and successful as possible, as strong as accessible america will be good for the world and good for australia, and we look forward to doing lots of business with you. is thee: minister, this u.s.-australia relationship. there is another relationship that you are very reliant on, the china-australia relationship. what happens if there is a trade war between the u.s. and china? you get in the middle of that. mr. cormann: we don't believe that there will be, there should be a trade war. we do have a very strong relationship with the u.s. the united states is our largest destination for investment, our largest source of investment for our investment and china is our largest trading partner, the u.s. is our second largest. these are two very important trading relationships. we look forward to them going from strength to strength in the years ahead.

francine: i have not heard that optimism from many people here in davos. what kind of impact will his policies have on the region?ific there must be a little bit of concern, even if we need to give him a time to understand his policies. mr. cormann: it is too early to tell. from our point of view, we look forward to working with the trump administration. there was a range of areas where a stronger has an interest, we are committed to the transpacific partnership. and we are committed to proceeding with it. it will be conversations to be had in relation to this, not only with the u.s. but also with other other countries than australia that are part of that. but we have got to give this time and we look forward to engaging positively and constructively. francine: are you concerned about the level of the aussie dollar? this is one of the strongest performances. it must hurt your ability to get away from mining and to tourism and exports. by cormann: the value is set

the markets. not something that is controlled by a government, and that is an important feature of our system. it is one of the economic stabilizers in our system. it is what it is. francine: talking about the surplus, the s&p warned that it was remaining pessimistic about the government's forecast to return to surplus by 2021. are you sticking to that target? mr. cormann: after the -- budget, all three major ratings agencies confirmed australia's aaa credit rating. it is true our projection is for return to -- in 2021, and that is based on what we know today about economic setting and all the policy decisions that are reflected in our budget. we are committed to reaching our target and to doing every thing we can to ensure our budget is in the storm as possible position. francine: but what you doing to make the rating agencies out looks a little more optimistic? mr. cormann: what the rating agencies want to see as we are

implementing our plan. they want to see we can lead to legislative budget improvement. over the last three years we made progress. since the last election we have made significant progress. i think they will want to see that continue. francine: i was trying to go to the report this money. the language is pointing to an immediate loss of the aaa credit rating that could come as soon as may. is that now inevitable? mr. cormann: it is up to the ratings agencies, but i would say every budget update, there has been a lot of speculation. every time there has been speculation the ratings agencies cap confirmed that the aaa -- have confirmed that the aaa rating has been delivered. we do the best we can every day to put the budget and the best possible position. and it'll be for others to make judgments and up to the ratings agencies to decide how they want to approach it. francine: how critical is that

rating? mr. cormann: it is important to rid of course, it is important in the terms of the cost of borrowing in a story. we value our credit rating and we are focused to doing what we can to ensure the budget is in the right position to preserve it. francine: we have been speaking to a number of minors and investors and mining companies, and there was a real turnaround in the last six or seven months, andou believe mining commodity prices will continue going up? mr. cormann: it is true that the price, the global price for quality exports, iron ore and coal, have recovered. over the last decade we have capital investment -- into export volumes when it comes to iron ore and coal. the commendation of increases in export drawings and the recovery and prices is good news from an australian point of view.

but we are focusing on making sure that all other parts of the economy can be as competitive internationally as possible as well. francine: how worried are you about the australian economy? for the first time you saw contraction in the third quarter, the first contraction in five years. mr. cormann: it was very much -- weather related. our economy continues to grow. we are into our 26th year of uninterrupted grwowth. we are growing slightly better than the average, better than all but one of the g-7 economies and our unemployment rate is at 5.7 percent which is better than previously anticipated, better than the average. look, we're not obviously taking anything for granted. we are focusing on doing everything we can to ensure we are in the best possible position to deal challenges and to take advantage of opportunities. francine: do you think there will be another quarterly contraction this year? mr. cormann: we are not

expecting it, but obviously, the future will tell what the economic performance is going to be a future quarters. francine: this is the second year you're coming to davos. is the mood this year, because not many people from the trump administration, because people are concerned about populism, is the mood different to last year? mean,rmann: look, i obviously with the transition happening in the united states it was very noticeable that there was a much smaller u.s. presence this year. i thought the speech of the president of china was, obviously, quite historic. theening to him promote virtues of free markets and trade liberalization and arguing that making a case against protectionism, i thought that was a very compelling. listening. i think it has been a good word. it is important that the world continues to engage with each other, that we continue to focus on how we can deliver the best possible outcomes for people around the world, and this is a

very good opportunity to do that. francine: thank you for your time. the australian finance minister mathias cormann. more greatplenty interviews from the world economic forum. the time for your first word news. trump has promised to move into the white house. speaking on the even his inauguration in washington, the president-elect vowed to carry out his campaign pledges to harden america's borders and strengthen the military. mr. trump: it's a movement that started, and it is a movement like we've never seen anywhere in the world, they say. there has never been a movement like this. and it's something very, very special. and we're going to unify our country. youour phrase, half of are wearing the hat "make america great again."

nejra: george sowers has called donald trump a con man who will fail. speaking to bloomberg, the investor also warned that the stock market rally since the election, which was spurred by the president-elect's policies to boost spending, will come to a halt. george soros: right now uncertainty is at a peak. and, actually, uncertainty is the enemy of long-term investment. so i don't think the markets are going to do very well. right now they are still celebrate. but when reality comes, it will prevail. chair federal reserve janet yellen has backed a strategy for gradually raising rates. stanford, she

argued that central bank has not been behind the curve in containing inflation but admitted it cannot afford to let the economy run too hot. as donald trump is set to enter the white house, yellen said fiscal policy is one of the many uncertainties the fed has to deal with. the u.k. prime minister has offered her strong support yet for the city of london as brexit moves closer. theresa may's comments come as large banks prepared to move staff abroad after the u.k. leaves the e.u. i wantinister may: to ensure we can keep financial services and the city of london and like global britain will do just that. 24 hours aal news day powered by 2600 journalists in 120 countries. this is the number. -- this is bloomberg. francine: we need to look at the pound and gilts. u.k. december retail sales falling 1.9%.

that is much more than economists expected. 0.1%.e expecting a -0 this is the picture for pound, 123.330 to a little bit of a movement. and we have u.k. household sales. januarythemost since 2010. we will have to dig into the implications of this, whether it was a seasonality or, you know, weather effect, or whether it is linked to brexit and maybe some people holding back because they are concerned about inflation. talking inflation, one of the most difficult things to predict is monetary policy, how you adjust with it, what the impact of negative rates is. let's welcome the deputy governor of sweden's riksbank, who joins us for an exclusive interview. thank you for joining us here on bloomberg tv.

what is the one thing that, the perception of how you said military policy. --monetary policy. do you look at the u.s. or is i t more on sweden? >> a noted to get that right we have to bring in effect as you just mentioned. international economics, ethics movements, financial movements, what do we think about the cyclical outlook, what we think about the structural that togetherigh into a forecast and then we make a decision of what we think is an appropriate monetary policy. -- it's based on an inflation of 2%. that is the thing we try to achieve. francine: when you look at the kroner it strength and quite a lot since the central bank stopped short of cutting rates.

is that good, is that bad/ >> we have a floating rate. in a way, it is neither good or bad. we have to live with that and we think that is a part of the flexibility that the swedish economy benefits from. we don't target a particular swedish exchange rate but we see it as one at a critical point for when we assess the inflation outlook. make a forecast every time we make a policy decision. and we expected the swedish kroner to gradually appreciate over the forecast horizon, which is three years out. however, we do not want this appreciation to move too quickly, and that is why we have been talking about and say that it is still a source of concern for us. francine: because of the level? again, you say you would be happy with a gradual increase.

we are not close to a critical level at the moment? >> well, what is critical or not the,out how you value all the kind of indicators going into the forecast. two, three years back. inflation in sweden had been too low, four years. expectations were starting to lower. there was a question whether monetary policy could achieve in inflation target anymore. in that situation, as a central bank, you become more cautious about the exchange rate. now now we have gained a lot of achievements. we have now and inflation in sweden approaching the 2% target, roughly at 1.5%, as we speak. swedish economy is performing very well. 3%, 4% growth. we are getting there. and then we can make a somewhat different assessment on the currency. it is still a source of alertness for us, but we monitor

the situation. francine: are currency interventions an option? >> they are still an option, together with the potential of doing further rate cuts, q.e. here, the board, we consist of six persons, have different views on what is the appropriate policy at the time. been one of three you did not consider it necessary to do further q.e. but we agree on the whole, the ineral view, and we are all great believe and committed to meet the 2% target. francine: you are mentioning the strength of your economy. do you believe this appreciation youroner is due to economy firing on all cylinders? you see central banks missing their inflation targets. >> we have that situation a couple years ago, the swedish economy was one of the first that experienced inflation going too low for too long. now we have demonstrated if

you use monetary policy, you can make it work in your favor. inflationrebound and since three years back, inflation expectation are not approaching targets again. so, we are almost there. francine: you are also against the extension of government bond purchases. do you see a situation where you would be for it? >> well, i was happy to support the accommodating monetary policy up until i would say about a year ago when i thought it was necessary for cyclical reasons, for inflation outlook reasons. now i take it somewhat -- a somewhat more cautious stance. accommodationre is required at this time, but this is about risk assessment. and this is beyond, i would say, macro forecasting model eighting.

ing. there are not strong differences between us and the board. i thought it was appropriate to hold back, to look to the butzon a -- the horizon, others wanted to continue. i think that is the natural behavior in a board. francine: donald trump gets and 90 rated at couple hours. is he going to make your job a lot more difficult -- donald trump gets inaugurated in a couple of hours. >> i am a civil servant. the world is confusing in many aways. it is not easy, but i think, especially being in davos a couple of days, there is an optimism that things can be really good in the long run. but there is going to be some uncertainties and troubles in the meantime. and we are just going to have to handle it. forcine: thank you so much joining us today. the deputy governor of the riksbank. coming up on bloomberg, we will

bring you special coverage of donald trump's inauguration as the 45th president of the united states of america from 3 p.m. u.k. time. is comingtary-general up and talking about donald trump, about security around the world. this is an important interview not to miss. this is bloomberg. ♪

ani have described him as imposter and con man and a would-be dictator. but he's only a would-be dictator because i'm confident that the constitution and the institutions of america, of the

united states are strong enough, the division of power is in operation. would-be dictator, if he could get away with it but he will not be able to. francine: george soros with his thoughts on donald trump. talked about also security. we talked a little bit about what the world order will look like in 2017 and beyond. i'm very pleased we are joined for a great conversation on security, the nato secretary-general. jens stoltenberg. secretary, thank you so much for speaking to bloomberg. in a couple of hours, donald trump gets inaugurated. have you had personal securities is -- assurances that he will stay committed to nato? francine: i spoke. stoltenberg:

with president-elect donald trump after he was elected and he relayed a message to me and the alliance that he and the united states will stay strongly committed to nato. and that has also been a message has nominated as the new secretary of defense and the new secretary of state. mathis,o tillerson and they have strongly expressed strong support to nato. i'm confident the united states will stay committed to nato. questioned the, defense clause and called the alliance obsolete. gen. sec. stoltenberg: nato is the most successful alliance in history because we have been able to adapt to change. for 40 years, we were focused on collective defense in europe, deterring the soviet union. after the cold war, we went out the wars helped end and the balkans and fighting

terrorism in afghanistan, and fighting -- in africa. now we are coming back to europe, focusing on collective defense and a more assertive russia. nato is adapting and that is the andon why we are a strong successful alliance. i look forward to working with president trump on who we can continue to adapt nato, and especially how we can focus on increased defense spending among european allies, because many of them have to invest more in defense. francine: i understood your message loud and clear up your you're confident nothing will change. what if something were to change? what if there was a u.s. that was less committed to nato. what would our security look like and the alliance look like? gen. sec. stoltenberg: i'm convinced the united states will stay committed because we have to understand a strong nato is good for europe, but it is also good for the united states. two world wars and a cold war ha ve taught all of us that -- within europe, -- stability in

europe is important for the rest of the world. and second, we have to remember the only time that nato has invoked its collective defense after anrticle v, was attack on the united states. and hundreds of thousands of european soldiers have served in afghanistan in the operation which was a direct response on the attack on the united states. nato soldiers, nato allies i support coalition fighting isil. nato provides direct support and nato fights together with united states terrorism in many places in the world. so, this is also, a strong nato is important for the united states, and therefore, i believe the united states will remain committed to nato. francine: the u.k. has the biggest army in europe. it spends more on the military than anyone else. what challenges does its withdrawal from the e.u. pose? gen. sec. stoltenberg: brexit

changes the uk's relationship to the european union but it does not at all change the u.k.'s relationship to noat. -- to nato. the u.k. will remain -- a staunch ally. it has been clearly stated from the prime minister from the leadership in the united kingdom. justgain, i think that it illustrates the importance of nato as a platform for cooperation between the european nato allies but also cooperation between north america and europe. we need to modernize. we need to adapt. and i look forward to working both with the united kingdom, the united states, and all the other allies on how we can continue to do that. francine: secretary-general, there have been, -- four

battalions have battalions have been moved to to northeastern europe. and you also deployed 1000 u.s. troops to poland to this month. how can you avoid this being seen as a provocation to russia? gen. sec. stoltenberg: what we do is proportionate. and it's defensive measures as a response to the use of force you have seen from the russian side against georgia and against ukraine. confrontation. we do not want a new cold war. and therefore, we combine a firm approach to russia. the channelsping for political dialogue open in russia. and we will continue to strive for a more constructive relationship with russia. and i dno't believe there is any contradiction between being strong and having an open dialogue with russia. optimistic.u are you believe in the alliance, but there have been so many questions about defense spending coming from europe. is the u.s. not forcing europe to ask itself questions on defense spending we should be asking ourselves anyway?

gen. sec. stoltenberg: i absolutely agree with president-elect trump, and many other leaders in the united states, that many european allies have to spend more on defense. that has been my main message since i became secretary-general of nato in 2014. the good thing is that we have seen that the trends have shifted from a decrease in defense spending in europe and canada over many years and last year, we saw an increase. of course, the picture is mixed, but at least it is better than it was a couple years ago. e united kingdom, like poland and estonia and others, have reached the guideline of 2% of gdp for defense. many more are starting to increase. francine: does russia pose a hacking threat to nato? gen. sec. stoltenberg: we have seen the number of cyber attacks against nato and nato allies have increased significantly.

are behindt -- they many of them. that is the reason why nato significantly increasing our cyber defenses. we are sharing best technologies and best practices, improving our technologies. we have exercises and we help nations to improve their cyber resilience. and we decided this summer to establish cyber as a military domain, meaning we now have air, land, sea and cyber as military domains, showing how much we focus on the importance of strengthening cyber defense in nato. francine: jens stoltenberg, thank you for joining us this morning on the work tv. the nato secretary-general. let's get to the bloomberg business flash. china's growth accelerated for the first time in two years in the final quarter of 2016. gdp increased 6.8% from a year

earlier. a full year expansion was right in the official target range but the slowest since 1990. economic stabilization is giving leaders a buffer and a potential trade tensions with the trump administration. meanwhile, u.s. treasury secretary nominee stephen mnuchin says he is willing to label china as a currency manipulator. he made the comment during his confirmation hearing. despite donald trump softening his stance on china's currency policy saying he would not name the country avenue -- a manipulator on his first day in office. lloyds banking group ceo has reshuffled senior jobs to create a new role to advise on cost control ahead of a strategic update this year. bank's former customer services director will lead group organizational and cost management and she will also help prepare a three-year business plan due to be

announced in the third quarter. jpmorgan has given its ceo a $1 million rays after the stock climbed 31% last year. also dimon, who is chairman, got a $28 million compensation package for 2016, or 3.7% more than the year earlier. it overtook wells fargo, which stumble because of a bogus customer account scandal. that is the bloomberg business flash. francine: thank you so much. just over seven hours from now, donald trump will be sworn in as 45th president of the united states. speaking last night at the lincoln memorial, he vowed to make america great again. we heard that. mr. trump: it is a movement that started, and it's a movement like we've never seen anywhere in the world, they say. there's never been a movement like this. and it's something very, very

special. and we're going to unify our country. it,our phrase, you all know h alf are wearing the hat "make america great again." francine: we have megan murphy, editor of bloomberg businessweek, a former washington bureau chief. she has been on the campaign trail. this is a different inauguration for a different president. sebastian: > >> we have the in niger ration today that will be pomp and circumstance at a full cast of characters -- we have the inauguration today to her tomorrow we have hundreds of thousands of women dissenting on washington to make a protest. that is going to be an interesting weekend to see of donald trump can really make good on his promise of delivering his vision to unite the country. francine: how does the unified? is it through the economy or message of hope? going to look at

ronald reagan, and some say he is looking at john kennedy's, an interesting combination of characters or he is really going to use next week to set up his agenda. and that is going to be primarily an economic agenda, about taxes. it will be about repealing obamacare and going to be clamping down on immigration. francine: talk about the pomp that surrounds this. we spoke to a number of ceo's that were invited by donald trump because they did business in golf courses. what would be different? megan: he is going to have his whole family around him. he is going to be less of a jubilation because i think there will be a little bit angst. we will have hillary and bill clinton in the audience. and we will have a moment from the transition from obama himself. a very personal election. barack obama put himself on the line. michelle obama put herself on the line to get hillary clinton over the line. they failed to do that.

we will see a little bit of sadness and wistfulness and donald trump will want to carry that forward in his own vision to separate himself and mark out a new, clear path for what he is going to do, not in terms of the events of his presidency but the bigger, broader, hopeful aspiration. francine: all of the ceo's and businessman network bashing trump four months ago praise him. what is going on? megan: they have seen what is happened with the companies that he attacks through twitter. guess what? they do not want to be next. everyone is trying to get ahead of this. there is one interesting thing that has come through at davos, they believe they can convince them of the merits of their business. they look at him as a businessman first. they believe that they can convince them, whether it is drug pricing, the auto industry. whether it is thank you. if they can make the business case on why things should stay status quo, or regulars you should be peeled away, the see an opportunity and there is nothing davos ceo's like better

than opportunity. francine: well said, to the point, editor of bloomberg businessweek. she will be joining us throughout the day. and we will bring you special coverage of donald trump's inauguration as the 45th president of the united states of america. that is from 3 p.m. u.k. time. bloomberg "surveillance" continues with tom keene. he will join me for the next two hours. we have a whole set of great guests, including ireland; finance minister. then we speak to the blackrock international vice-chairman philipp hildebrand. we'll talk to him about interest rates and we speak to the bank of france. this is bloomberg. ♪

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francine: except for the ceremony, donald trump ready to be sworn in as the 45th president of the united states. george soros says he doesn't think the markets will do well once the celebration begins. larry summers tells bloomberg he sees a risk of the u.s. abandoning its current global role and has concerns of a cycle of trade protection. and positive signs the g.d.p. accelerated for the first time in two years in the final pboc r of 2016 as the says they've provided support for major banks. good morning, this is bloomberg surveillance. we're in davos but the main action will be in washington, d.c. where we're seeing live pictures of capitol hill. this is "bloomberg surveillance" from davos with francine lacqua with tom keene. how different this ceremony will be to past years.

tom: the washington they'll see is a washington looking at polling ratings which makes donald trump the most unpopular entering president. francine: at around 40%, right? tom: 44%, 45%, who is counting? he has to stabilize it and if is falls under 45%, that's a huge deal. francine: he wants to unify america. let's see what the speech brings later on. here's taylor rigs on trump. taylor: donald trump will be sworn in as the 45th president of the u.s. today. he's promising to unify a country that's still divided over his election on the steps of the lincoln memorial in washington, trump told supporters he's going to make america great for everybody. this morning there's a tea at the white house before he heads to the capitol hill for swearing in. donald trump's choice for treasury secretary is ready to label china a currency

manipulator. steve mnuchin testified at a senate hearing. he backed off to name trump a manipulator on his first day in office. there is a wait and see attitude being taken towards the incoming american president. the criticism of the european union weren't helpful but in davos he told bloomberg he's ready to give trump the benefit of the doubt. >> u.s. and europe has a long-standing strategic partnership which dates for many decades and we think it's very important to continue in the spirit of this strategic partnership and this is our message, also, to the u.s. we're willing to continue to work closely together. taylor: dom broff ski says the e.u. is waiting to judge trump's first step. bloomberg, powered in more than 120 countries, i'm taylor rigs,

this is bloomberg. francine and tom? tom: thanks so much. let's do a currencies and commodities on election day. i want to get to the peso but to show you there's a modest improvement. the second line, 126 basis points is better than good for mr. trump as an indicator of a buoyancy within the economy. we've seen the last few days, the dollar peso near 22 is interesting to say the least. we'll get to that with our important guests in a moment. francine: what you do on the market is you wait and pause for the speech. i wanted to put in there the pound. we have a little movement on pound mainly because retail sales were much worse than expected. it's a weather effect but we have a .09% in the u.k. and now let's discuss trump's inauguration with francisco gonzalez.

thank you so much, chairman, for coming on. this is something we need to keep a close eye on. your biggest market is mexico. how do you respond to all this trade war talk from the president-elect? francisco: america is still sort of free trade, innovation, looking forward. now we have a new administration which is made up of various businessmen but they will learn very quickly the economics of politics. i don't think going backwards in not accepting free trade and innovation is the right way. so i'm quite optimistic the new administration will change their minds and will understand the economics of the world. not just for the states but for the world. i'm more optimistic.

francine: do you have a contingency plan in mexico if things were to turn ugly between mexico and the u.s.? francisco: not at all. mexico is a clever country with more than 120 million people. our banks are doing well. the economics in mexico facing these difficulties is doing quite a good job. francine: donald trump's policies could affect the economy, it's a given. francisco: it's effective, less of the g.d.p. than previously thought. sometimes you need some challenges to turn challenges into opportunity. it will be a wake-up call for mexico. mexico and the states need each other. in the immediate long run i don't see a specific problem. tom: in america we have a phrase we use too often, victory lap. within this financial crisis,

ireland takes a victory lap for their courage to clear markets early and i would suggest spain and madrid take a victory lap for the way you've finessed your way through the crisis and recovered rapidly. what's the best practice, the bbva and spanish banking the italians need to know and greeks need to know? francisco: in house was the problem four years ago when the present government came to power and we clarified the banking system abruptly and put 40 million euros in the saving banks. another system is working very well. spain has grown at the rate of 3.3% last year, today this year, probably 2.6%. you've got some problems. going back to mexico, i think they will visit the problems and are stronger than people think. francine: talking about problems, you have a huge

presence in turkey and we talk about turkey on a daily basis. tom: 3.82 on lira today. francine: they have problems of their own and the currency is in a freefall. are you committed to doing business in surky? francisco: we are probably the most advanced bank in technology and we're working very much. of course turkey has some political some political powers and in mexico it is a bit of reaction from russia and turkey and hopefully america will join that group. and now we have to face up the currency. in mexico they have operational rates and in turkey, we hope the central bank will attack this policy. this is a short-term problem is n the long run, turkey

ok. tom: when you look at global banking are american banks a different competition or day to day as you provide guidance to bbva, or are they just another competitor out there? how do you treat the expansion of american banking? francisco: there are 20,000 banks in the world. there's a huge disruption, huge. tom: and you're ahead, right? francisco: we are ahead because we work this information for 10 years in a row and what will happen the next five to 10 years, there will be a fewer number of banks, there will be a new lead of competitors and there will be some giants. tom: i don't mean to be rude but it's friday in davos, you have to be a great merger candidates for troubled european banking out there. david reubenstein and frankly

deutsche bank said on my panel european banking is about nationalism. tell me how you -- the prism of nationalistic europe in banking the next 5-10 years. francisco: frankly we are in spain but looking at the states, mexico, america, turkey and other markets. we are not focused -- tom: you can't break news on merger and acquisition? francisco: no, we won't talk acquisitions in europe. we wouldn't be involved in that because our focus is forward for the rest of the world. what we're seeing is it's incredible. you know the metric of assessing your customers, in the banking system, our bank as a whole is 19 but our banking up is 63.

francine: this is a longer term transformation and you're trying to be sure bbva is a bank that survives but takes a huge market share for digital because the others will go away. in the very short term your shares are under such pressure because of weakness in turkish lira, because of weakness in mexico peso, how do you stop hat? we have our assets in mexico and turkey and are used to doing so for a number of years and know how to work in the emerging markets and hedging 50% of our assets. p/e is impact and our not that bad. in mexico the next five years, we don't see, frankly, a huge problem. "been working as chairman for 20 years now, 21. i've seen many events. you have to assess very well withstand in the short

term. francine: when do you expect to recover your share price? francisco: i hope the american administration understands trade and all that stuff, the share price will be higher. but for me that's not the most important thing. the most important thing is to show to the world that we have turned the bank into a machine that will be able to work with a low budget of cost and acquire a huge amount of customers. now we have 63 million. we pretend to have hundred of millions of customers the next five years. francine: thank you so much, the executive chairman of the bbva. next we talk about brexit and speak with the irish finance minister and we'll be asking him about taxes and attracting talents from london to dublin. this is glerg.

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tom: you never know the right time but it is somewhere close to the vicinity of 12 noon in washington. the inauguration of the 45th president of the united states is always security extraordinary. cirilli looks at this today and this place will pause at 6:00 p.m. tonight. francine: kevin is standing by. let's go to him. tom: good morning. the president, president obama, will take tea with president-elect in the blue

room today at the white house. what would you suggest the topic will be in the acclaimed blue room? kevin: to be a fly on the wall for that conversation where one outgoing president will usher in a new era, president obama meeting with president-elect trump in what is a historic and quite frankly, an american tradition, ushering in a peaceful transfer of power with their wives. but the bottom line is this is a president who will look to get to work immediately. forget about the first 100 days, this is about the first 100 hours. tom: in the first 100 hours, what would you guess you'd see in the first day or two of the rump administration? kevin: i've been talking to senate members all week and they're anticipating a quick and swift action with several

key executive orders, including getting the ball rolling to repeal parts of the affordable care act or obamacare. i can also tell you that work is already underway for the administration to pass tax reform. steven mnuchin, the treasury nominee who was up here yesterday for his senate confirmation hearing is already meeting with key members of the administration and key members of the republican caucus to be the point person on getting tax reform. and then of course rolling back banking regulations including international regulations that they argue would help bolster the u.s. and give them a stronger seat at the negotiating table. francine: thank so you much, kevin cirilli in d.c. i've been looking forward to the conversation all day. the one man who will have to deal with the trump administration is the irish finance minister, michael noonan. thanks for giving some of your time to bloomberg. will you stop and watch the president-elect in a couple

hours from now as you in the next couple months will have to deal with his administration directly? michael: i'll probably be flying from dublin to zurich but will pick it up later in the evening. francine: what kind of relationship would you hope to have with the administration? michael: professional and business. it's the office that matters to us rather than the personality. and we always ensure we have good relationships with the white house. this year already, our prime minister has been invited to visit the white house on st. patrick's day and we'll continue with that. i met mr. trump because he has some investments in my part of ireland, and he came into the airport and i greeted him there but before he had interest in politics last year. he was a very affable gentleman and there with his daughter and two sons and they'd be well known in that part of ireland. francine: there are two questions, the trump policies

could have on ireland. first of all, possible tariffs or trade wars. the second one is the repate reation of taxes and taxes that could be liing in ireland. michael: i think that will happen anyway. i was with jack lu some weeks before christmas just after the election and it was quite clear from the conversation i had that even if there was a different president there would be major tax reform and the treasury had done a lot of work and had talks across the aisle with people like paul ryan and were able to nominate numbers for me at that stage. i think there's a political window between now and june and they need to deliver in that space. if it goes to the autumn, you're in another elective cycle. but i would expect a change. but to say american companies in europe and ireland, all of them have a tax liability of 35 % and because they didn't

repatriate the effective tax rate was zero. it's not like competition on tax where somebody is going to reduce their tax rate. on don't see a huge change the accounting systems of american companies in ireland and so far anyway our pipeline is very, very strong and in the last two years we have more investment than in the previous 10. tom: in our previous interview i mentioned the courage of ireland to clear their markets. you people were out front on making the toughest decisions. we look back and forget but 2008, 2009 were absolutely extraordinary. what was the lesson ireland learned about dealing with the most difficult of political economic problems, the lessons president trump can learn from ireland. michael: first of all, you're elected to make decisions. you're not elected to hang around and defer and fudge. even a bad decision or a

partially bad decision is better than no decision. and in our decisionmaking process we took a lot of advice, we took a lot of advice from the u.m.f. and european colleagues and while we did make bad decisions, the majority of our decisions are very good and put us in a place where now for the foreseeable future the economy is growing to 3.5% in the forecasting period sometime in the 2020's. francine: will you have to pare the forecast back? michael: no, we pared it back already. francine: brexit is looming. michael: we already paired our focus back by half a percent. since the referendum in the u.k. in june, we've continued to grow by 12% in 2016 and that's goods and services. we're on a very strong run but in a very uncertain world and probably the most open economy in the world. we live by selling goods and services to anybody who will

buy them. tom: the prime minister came here and made a splash talking about a rejuvenated nighted kingdom. maybe they can take lessons from ireland here. is there an ability for new or more vital trade agreements even if not formal between ireland and the united states? michael: there was an agreement negotiated between the european union and the united states and in our negotiations after brexit, we're a part of the 27th. so in terms of negotiations, -- tom: can you do a side car deal no one knows about in europe? michael: no but we can arrive at an understanding. which we hope the european negotiators will bolt on to their agreements. tom: irish whiskey over there, now we really can start to talk. francine: what kind of deal do you think the u.k. will get? michael: i was surprised, first of all, and there are wide

parameters but that helps. at least we know the pitch on which the game will be played. francine: but if the minister wants to control law making and the administration, the negotiations could be very shortly -- if europe says no to that, that's it. michael: i don't think people will approach the negotiation that way. our speech was very well drafted -- well crafted and conciliatory and when the europeaned replied they replied very conciliatory as well. very few people have read it. francine: on the plane back, i'll give you a copy. michael: there's a tail to it. and if it hasn't conflated in two years, the u.k. are automatically out unless as and a unanimous agreement to give an extended period. they need a transition period. and then they need a period for putting a new agreement in place. we're looking at five or six years, you know.

francine: the problem, the noise, the rumors we're hearing is the u.k. could be looking, if they don't get a good deal with the e.u. is cutting taxes to businesses. but quite significantry. this would be a concern to ireland directly. michael: not specifically. if you look at the sequence, george osborne two years ago announced he was cutting u.k. taxes 17% and that's agreed now. and we're 12.5%. so the differential isn't great. during the referendum, chancellor osborne said he was going to bring the copper rate below 15% but the new chancellor, phillip hammond, said he wouldn't be bound by that. so while it may come down a little, they're already at 17%. they're not a high conference text. it sounds like the u.s. at 35%. tom: let me ask the two of you a question, the financial times said this today. francine: moving do dublin. tom: the united kingdom is a

new singapore. the u.k. is singapore and for that matter dublin is singapore. michael: people are only looking at the e.u. bit. the united kingdom is bound by the oecd rules which they negotiated as participants. and the mandate now on corporate tax is significant and quite tight. and the deal is not only on rates but other tax breaks. it's not possible under other international agreements. tom: to be a singapore? michael: it's not possible. francine: i want to ask you about this, they were compared to monaco. they may clear vision about a fairer society and inequality to something like a tax haven like singapore. it could happen but would be a difficult sell to the people. michael: there's the problem of all the finance ministers if you don't collect from one tax, you have to collect from another tax.

it cuts your tax down so the yield is low, you end up having to raise -- tom: that's a davos exclusive, our taxes are going up. francine: we spoke to a lot of c.e.o.'s from the financial community and i was told one is trying to figure out where to move people if he gets a clean brexit. we talked about dublin and said isn't that the natural place because they speak english and was unassured and kept saying it was one of the possibilities. how many jobs do you think you'll attract away from london? michael: too soon to say. a lot of the companies and the city of london are involved in contingency planning at present and they're effectively collecting information about dublin, amsterdam, frankfurt, paris. what we have is we have over 100 hard inquiries for our central bank to establish what the regulatory union would be in dublin and many countries

have come down from acquiring the possibility of getting their teenage children in good schools in dublin. there is going to be movement and it's going to be a lot of movement into dublin but it's not possible yet to contemplate. tom: thank you so much. michael noonan, the finance minister of ireland. of course a special day in the united states. bloomberg across all our media, bloomberg radio, bloomberg television and our digital coverage, the inauguration of the 45th president of the united states. i know david gura will give you perspective at 10:00 a.m. and then we'll move on to mark hell principal's coverage. this is mark helpran's coverage. this is bloomberg. ♪

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for a 12 noonish inauguration and a speech by the 45th president of the united states, donald trump. good morning, everyone, from davos, switzerland, the meetings of the world economic forum, francine and tom. our final day in davos. it's been a most interesting and nuanced davos and with the new slow it's been extraordinary but today everyone focused in washington with our first news in new york. taylor: we're sticking with washington a few hours from now, a journey that began 18 months ago gets to a place few believed possible. donald trump will be on the steps of the u.s. capitol hill where he'll be sworn in. he spent the day in a series of events around washington and promised to he newt the country and said his cabinet as the highest i.q. 6 any that's been assembled. the senate is expected to confirm the two members of that cabinet, both ex-military men and retired army general james

mattis is the defense to run the defense department. the committee voted 26-1 in favor of his nomination and the retired marine general jon kelley is expected to be confirmed as secretary of homeland security. chuck schumer says it's possible some of the other picks can be voted on quickly. meanwhile, billy their and william buffet supports the choices for his cabinet. he backed hillary clinton but will support the picks. and he said he should pick people to help him run a company. trump is likely to be a pro business president. people who once said would never do business with him have changed their minds and that could be a problem. we spoke in davos. >> i see very disturbing tendency to enable whatever the instinct of this new

administration is. i think it's something over time the business community may come to regret. taylor: summers says trump poses a geopolitical risk because of his relationship with china and europe. bloomberg, powered by over 2,600 journalists in more than 120 companies. i'm taylor rigs. this is bloomberg. francine: thank you very much. as concerns over international trade mount over the u.s. administration we spoke with the toyota chairman. let's take ourselves back to january 5 when the chairman found out that trump had tweeted about toyota and the fact it didn't have -- >> this was the beginning of it. francine: in 10 minutes the share price lost $1.3 billion in market cap. here are the comments of the chairman of toyota in the after math of those tariff threats from the president-elect.

>> we were a bit surprised our name was mentioned by mr. trump. what he's trying to do is expand jobs and contain competitiveness of the u.s. industries. we have many factories in the u.s. and are increasing our employment so our contribution is quite significant. tom: the chairman of toyota. we're thrilled to bring you a gentleman with perspective on asia and global economics and politics. he's provided leadership to singapore for many decades, former ambassador to the united nations but and now to their university. ambassador, it's wonderful to speak to you today. it is a most unusual time, president obama spoke of an asian pivot? did we have an asian pivot and will we have with donald trump? ambassador: as you know, even

president obama backed away from the word pivot because it implied the united states had left and was coming back. but the nuns never left. and actually, the united states president has been fairly consistent across the pacific. but what he was trying to signal was maybe the secretary of state wouldn't go so off in the middle every time a crisis breaks out and a crisis breaks out in the middle east two or three days. he said let's focus not what is urgent but what is important. clearly president obama was right. the end of the day the 21st century. in p.p.e. terms, china is already the world's largest economy. in p.p.e. terms, the four largest are china, the united states, number three india, number four japan. three out of the four top economies in the world are already asian.

so it's perfectly natural for president obama to say focused. francine: how will donald trump deal with asia and specifically china? ambassador: i think the honest answer is nobody knows. what really struck me, a couple things surprised me in davos. the interesting thing in davos is how calmly the chinese are reacting. to the inauguration. francine: for now. ambassador: in a sense they decided strategically, a lot of the statements and tweets and all may be part of what he might call the opening bargaining posture of donald trump. they don't see him making a

very serious effort to undermine what is really going on. because at the end of the stay, frankly. let's see if the united states starts a trade war with china, the united states will also offer -- suffer. it's very clear. tom: if we start a trade war with china do we start one with singapore? ambassador: of course not. that is very different. but the consequences will affect the whole world and that's why. it's actually good for us to have a china that is patient and careful with president donald trump. a china that is angry and reacts -- francine: george soros disagreed and spoke toing exclusively for had a minutes and said there are internal pressures inside the chinese community to push the president to retaliate if provoked and retaliate harder than anyone

could imagine. do you think he's wrong on that? ambassador: i suspect, i know asia a little bit better than george soros. he's right about one point, he's absolutely right that there will be internal pressures on the president to react. no doubt about that at all. but does i have the capacity to expand those threats and this is remarkable about the president shi. he has far more power than probably any of his predecessors, so with the amount of power he has and amount of respect he has, if he tells the chinese people, let's be patient, he has enough political credibility and strength to do that. tom: we notice currency pairs that are sometimes unusual. if i look at currency of

indonesia compared to malaysia, clearly sandwiched within an historic middle, all of a sudden there's a change. indonesia struggled for years and recently has been an indication of indonesian strength relative to the turmoil of malaysia. from the prism of singapore, is malaysia fragile enough to provide instability to the region and asia and indeed to the world economy? ambassador: you'll find me a mr. good news guy. francine: that's refreshing. everyone is optimistic here. ambassador: malaysia -- francine: so is everyone else in davos. > i've been a ray of sunshine. tom: melting snow as you were walking down the promenade. ambassador: selling the message, i don't know if you saw where i talked about the fusion of civilizations and how

the world condition is getting better and of course asia is leading the charge getting better. going back to your question on malaysia, the good news is malaysia is going through a challenging period but malaysia is not tradge i'll, not unstable and in fact for the last 50 years, india emphasized this, malaysia hats been growing over 6% a year. that's a big deal, you know. tom: on this important day of inauguration you mentioned the foreign affairs article with secretary summers. far he'd sakario was in the same issue with his post-american world. what is the post-american world president trump faces today? ambassador: i can give it to you in one word, multipolar. and it will be clearly for the first time in i would say maybe since world war ii or something, we're moving to a genuinely multipolar world where you'll have not just one source of a power, which is what the united states was

after the end of the cold war but you'll have several major powers. i want to emphasize another point. multipolar is very good for the united states because when the united states was unconstrained and restrained, it got into unnecessary wars. and just two or three days ago, the united states is based at $13 trillion. francine: the counterargument is the world is getting richer and we're better off and lack a sense of purpose in our developed nations and which is why we elect polarizing figures which is the why brexit happens. how do you give a sense of purpose and hope for the future for those who feel they've been left behind by globalization? ambassador: there's a simple answer, it's called speaking the truth. one problem of western politicians, the reason why trump has emerged, the reason why brexit has happened, the marty la pen is a

threat, the people in the west have not been told in this new world with asia rising, with other countries succeeding, the west has got to change and adjust and adapt. and the west can change and adjust and can adapt. you still have the world's best universities, the world's best think tanks, so on and so forth. you really can succeed but you have to adjust and not go on autopilot anymore. in a multipolar world, the united states has to change and adjust and adapt. it is a better world that is coming for everyone else and for the united states, also. tom: thank for you bringing us your optimism. the snow is melting. thank you so much, ambassador, for being with us today. francine? francine: coming up in the next hour of bloomberg surveillance, we speak with the bank of france.

that's an exclusive interview and would be great to have insights about bond purchasing and how he sees inflation targeting within the european central bank. 6:40 a.m. this is bloomberg. >> in my opinion it's unlikely the prime minister is actually going to remain in power. i think already he has got a , a very ed cabinet all majority in parliament be in his y, i think

own class. ♪

>> with that or wishing for that. francine: as everyone will stop and watch the inauguration in a couple hours in washington, d.c., for now we need to focus on the economic outlook. this is probably one of the most attended sessions here in davos, always on the last day of the world economic forum. today it's larry fink but also the german finance minister and phillip hammond, saying the trump administration creates uncertainty for the e.u. i bet 90% of that conversation or 70% will be on trump and the other 30% on brexit. tom: what's important in our global audience, from frink was

clearly framed as the candidate if hillary clinton had won the election. francine: we'll keep a close eye on the panel and bring you any news if we have it. a lot of thinkers here trying to -- being very diplomatic more than usual. there hasn't been any trump bashing. tom: as discussed earlier if you saw our coverage, without question the american c.e.o.'s have taken a positive tact, some of that is plightness. and michael key is providing coverage and he has decades of experience in looking at the ballet of an inauguration. michael mckey, mr. and mrs. trump will leave blair house and attend white house and the important coffee and tea in the blue room and then i believe hey get in a car and migrate to the capital. what will they speak about from

the acclaimed trip from the white house to the capital? mr. mckey: that is an interesting question because it's not clear the obamas and trumps get along very well, at least politically. the obamas have been kind to the trumps according to the president-elect so they may make small talk about the size the crowds but may not be something they want to talk about if the crowds are anything we've seen is an indication. it's a fairly subdued for the inauguration. tom: without question this time is different, michael. what will you look for within the audience being assembled as the president takes the oath? mr. mckee: it will be interesting to see the mix of people that are here. so far trump won the election by appealing to white voters, white male voters in particular and see if that's the kind of crowd he draws today.

his concert at the lincoln memorial last night, largely made up of that audience, pretty much all white males with few exceptions performing. so it isn't a broad slice of america as barack obama's inaugurations were the last two times. tom: right. kevin cirilli made very clear the transition process has been rocky. you know the department of congress, you've been in there where wilbur ross will hold court. how empty will that building be for second ross when he walks in monday morning? mr. mckee: the eighth floor where the secretary works will be relatively empty because those are the people, the political appointees who no longer will be working. we're asking people in critical jobs to say over the next few weeks and help keep the government running. not to make decisions but there there in the case of emergency. so far he's appointed 29 of the

660 executive positions that need to be confirmed by the senate which means for the time being at least, the government, the executive branch will be run by the political version and he's got some political people in there in what they call landing parties but there won't an lot of the decisionmakers and when wilbur ross tries to find the men's room he has to find someone who has been around for a while. there aren't a lot of those folks. francine: yesterday we heard from the soon to be president of the united states that he wants to unify the country. will he succeed? mr. mckee: that's one of the key questions, fran. it's hard to know. he comes in as the most unpopular president ever since polling began with only a 38% polling. nd the recount with mr. bush had a 50% rating. it's not clear how much support he'll have for some of his programs and that will be

important because he wants to do things members of congress don't want to do like increase deficit spending. that will be a tough sell politically if you don't have the american people behind you. sean spicer said today his inaugural address will be aimed at that, more thematic and more an effort to draw people together than a laundry list of the things he wants to accomplish. tom: michael mckee, thanks from washington. in a little over two hours mr. and mrs. trump will begin the affairs with leaving the blair house in washington. we'll have our full coverage through the morning. david gura will join you at 10:00 a.m. and then move on to really important insights from halphideleman and mark erin. this is bloomberg. ♪

♪ >> impacting the developed economies. francine: pictures of the panel on the world economic outlook. larry fink is speaking alongside the managing director

of the i.m.f. alongside phillip hammond and also talking to the german finance minister saying there's a little too much optimism and christine lagarde doesn't worry about political europe in 2017. tom: the character and nuance of davos is uncertainty, it's not just a simple phrase but has a lot of reflections. francine: i caught up with the chairman who complained of a lack of purpose. earlier we spoke with the former u.s. treasury secretary, one lawrence summers and here's some of his key takeaways. mr. summers: i see very disturbing tendency to enable whatever the instinct of this new administration is. and i think that's something that over time the business community may come to regret. francine: the main takeaway, actually, is there a lot of uncertainty, people are trying to have a veil of optimism of

2017 and this could come from a renationary stance from donald trump but no one really knows how the political landscape in europe will change and how business and politicians will react to that. tom: this is the most important insights from jp morgan. you've got uncertainty but you can't model it, you can't guess it. there's no fancy mathematics for it. and then dr. frankel said if you take uncertainty to a higher order, a new place, a new emphasis, it becomes more untable. francine: if you look at the reasons and underlying brexit and donald trump, the economy wasn't really that bad. this is important, you need to reconnect with the person so you don't look at models or economics, it's what pulls your heartstrings and what i heard from many world leaders saying we need to start reconnecting with the person on the streets so they believe they have a purpose and they're taken care

of and have a better future. tom: i agree but the only way to reconnect with a person on the street is investment, jobs and economic growth and what everybody is reaching for. francine: we have an election in a couple months. coming up we speak with phillip hillenbrand. probably our highlight of the morning. he's also former s.n.b. chairman. the focus today is very clearly on washington, d.c. on the trump inauguration and what that means for foreign policy, security, but also tariffs and trade. this is bloomberg. . ♪

tom: mr. trump says, "i am just

the messenger peter: ."essenger p a rhetoric becomes reality. china, toyota, bmw would really lead to a trade war and a redux of the 1930's? in this hour, low tyson and hildebrandt and in washington, michael mckee and kevin cirilli. good morning, everyone. this is "bloomberg surveillance ," live from of the world economic meetings in davos. not right now with a great panel going on, with larry fink of blackrock, but at 6:00 p.m., donald time, all eyes turned to washington. francine: it is palpable. people want to talk about trump.

people want to approach the only representative of the trump entourage, who had to leave tuesday evening. interesting, world leaders with the nuance of -- tom: michael mckee, david gura later in the 10:00 hour leading up to the unknown duration. first, here is -- to the inauguration. first, here is taylor riggs. trump will be on the steps of the u.s. capital, where he will be sworn in as president. spent the day before the inauguration at a series of events around washington, promising to unite the country. the senate is expected today to confirm the first two members of his cabinet. both are x military men. james mattis is his pick to run the defense department. and senate armed services committee voted 26-1 in favor of

his nomination. john kelly is expected to be written -- is expected to be confirmed as secretary of homeland security. chuck schumer says it is possible that some of the other picks can be voted on quickly. warren says he overwhelmingly supports trump's choices for his cabinet. buffett compares the president to a ceo and says the ceo should have the ability to pick people that can help him run a company. global news 24 hours a day, powered by more than 2600 journalists and analysts in more i am taylorntries, riggs. this is bloomberg. francine? tom? tom: thanks so much. we need to go to washington right now with coverage of the trump campaign and the transition as well. our kevin cirilli on capitol hill. this is going to be a most different government, a most different administration.

yet he needs to get bodies transitioned, if you will, quickly. what will mr. trump be doing not so much today but over the weekend to get ready for monday morning? kevin: executive orders, executive orders, executive orders. for weeks behind the scenes, the top transition officials have been working with people here in congress, in leadership offices, to craft the right message and political optics to how to get their agenda in motion. take a look at obamacare, repealing the affordable care act. how is he going to navigate that? --ping up the transportation ripping up the trans-pacific partnership. and then with regards to international foreign policy, look for him to make a big splash on issues with the iran deal as well as dealing with isis. that he will get upset democrats, including senator schumer of new york.

how much will he upset republicans on the hill with this set of executive orders? i think on the issue of trade, for example, there are a businesstablishment, friendly republicans who work in tension with president obama, including house speaker paul ryan, to get tpp past. them on the issues like infrastructure and economic stimulus, there are some of the more ultraconservative tea party portion of his party that are skeptical of utilizing government actions to help grow the economy. so if he is going to base the reality on monday morning when he wakes up, this is in america in a governing year. how he is able to navigate that remains to be seen, but either way, this is an historic day in washington. nobody thought that the day would ever happen. we are hours away from donald trump becoming president of the united states. tom: kevin, president obama in

his first inauguration speech spoke of a better america. what will president trump speak of today? kevin: america first. that is the message of his campaign. he will argue about the president for all americans, and the house to put america first not only here at home, but also in the world. francine: kevin, thank you so much, or washington correspondent covering the inauguration for us. vice-chairman the , former fmv chairman as well. kevin was saying there is a new reality when americans wake up tomorrow morning. what does it mean for the rest of the world? we are going to wake up for a very -- we are going to wake up to a very different place as the 45th president gets inaugurated. >> this is a really propitious moment for the new

administration because they have the wind at their back. the global economy is in a strong phase of reflation. frankly, it will be no time before people say that we have richard -- that we have turned the corner. striking for me, other than the speech from the chinese president, as i did not hear the word "deflation" once. there was one exception -- governor kuroda today. us to two years ago when we were all up says -- when we were all obsessed with deflation, this is very different. francine: i imagine you think this is a positive change, but at the same time, we are possibly facing trade wars and currencies are volatile. are you more uncertain about the outlook now than you were two years ago? no, because i think the baseline outlook is clear. because of geopolitical risk and

trade interference -- which are very political elevated. i do not think there are any times in the postwar period where you have had the risks that we have today, but there are risks out there. the corporate sector is focusing on that. pmi's in the last five months have been consistently very high . and importantly, we have synchronicity. this is something we often underestimate. when you have all major regions essentially going in one direction, in this case in a positive a positive direction, the models underestimate what that means per buddy roemer means to be seen what happens around the policy side. that is true for trade, but it is also true for security. i had an important conversation with george soros. he was pessimistic about china, the u.s., even europe. do we need to look back at the seeds of the financial crisis to try and address the problems unhappy population, and

does it change the way central banks should think about monetary policy? philipp: no, i think we will speak much less about monetary policy. we have finally moved away from all focus being on the monetary side to other policy. that is something that the current central bankers have been waiting for for a long time. monetary policy, unless we have a financial crisis, i think will essentially be a non-issue moving forward. the big question is, what happens around trade and what happens around security? there are many ways you can go about trade. in terms of the discontent, my guess is, simplistically, if you had to look at this, maybe it is 25% globalization of trade. i think a big part of it is technology and the extraordinary changes we are seeing in technology. switzerland has already --

has always had a unique calculus in europe. mr. trump seeks and isolationism, not only a tone, but can he afford to do that? i think you have to be -- typically you want to be nice to those that lend you all the money. -- world is very i think the reality is, it is not that simple. we have built a world since the postwar that is incredibly interlinked. as we are seeing now in the complications around brexit. undoing that is a very complicated thing. there are many ways you can go about trade. there is no question that the global trading system is not entirely fair. it is certainly not free. you can go about this in two

ways. you can react by putting up work on breaking barriers down on the other side. tom: it would be inappropriate about eurok you swissie. let me ask you about the floating advantages of the rate in a better are place with the geopolitical challenges we have because currency can adjust. do the chinese need to move to a more modern, floating rate regime? philipp: the lesson is you want to do that gradually, but having it is an advantage. look at the u.k. look at how much of this exogenous shock was absorbed for the time being through the currency depreciation. this is a textbook case of why ultimately, by and large, floating currency still make sense. francine: but how bizarre is it, with china intervening

less, the renminbi would actually fall much further, and the u.s. suggesting that they call in a currency manipulator? philipp: switzerland is labeled a currency manipulator at the moment. we should not, again, overstate this. the important thing is what happens around trade policy. as far as currency, the big issue we will look at over the is does the two, dollar continued to depreciate, imply foroes that emerging markets, for china, and frankly, for the u.s.? francine: a follow-up -- the problem is that i get switzerland does not react to being called a currency manipulator, and i did not know that. i did not know that in treasury reports switzerland was called that. i think the chinese

president, xi jinping, gave a clear and extraordinary speech. to me, it is the most amazing memory i have of dollars -- of down in history as a significant moment. the basic messages we have a long-term strategy. message is we have a long-term strategy. not push us around too much. this is why we talk about uncertainty, because there are limits to provocation, and as several people suggested on the panel today, you want to keep in mind that you are borrowing a lot of money from china, the biggest lender to the u.s. being japan. the second biggest one is china. this is not a straightforward issue as it may look. and enjoyll come back another section with you. there is too much to talk about

today. ,hilipp hildebrand with us blackrock vice-chairman. francine: coming up shortly, we speak with the bank to fronts governor. -- the bank difference governor. that is live right here in davos. look for that at 6:40 a.m. in new york, 11:40 a.m. in london. this is bloomberg. ♪

>> i value financial services in the city of london, and i want to ensure that we can keep financial services in the city

of london, and a global britain will do just that. francine: theresa may wants to keep financial services in the city of london. i valuee said was, " financial services in the city of london." tom: what was that? francine: i do not know if that is encouraging news, or if -- tom: this is a perfect example about how everybody at davos is talking to the folks back home. just remarkable. francine: we are back with philipp hildebrand, blackrock vice-chairman. he lives in london. did we learn anything this week about brexit, apart from the fact that they are trying their best to communicate? philipp: we did learn something very important. from the swiss experience, i expect that you cannot have the cake and eat it. if you want control over immigration and no jurisdiction

justice, then you -- nobody believed it was black and white, and i think she did a great service to specify that. what is missing -- and i think going forward for us and many other financial firms will be the most important piece here -- will be assurance and clarity over time on a transition period. having watched the swiss negotiations over 10 years, there is no way you can close this in two years, and in fact less than two years if you look at the process. that is the key now going forward. how quickly can the prime minister in her european quickly can -- how they get clarity on what kind of transition we are going to have and where we are going to be at the end of this transition gekko francine: -- at the end of this transition?

francine: we spoke to the chancellor of the exchequer. on whether he would lower corporate taxes if there was a hard split from the e.u. with that make the u.k. more competitive and attractive? to some extent, but the u.k. is not some kind of the city state. the u.k. is a great nation. if you look at the broader political agenda of the prime minister, it is precisely to try to respond to the kind of discontent to address the root cause of what we have seen around the world in recent years. and i think one part of her strategy there is to have the appropriate taxation of corporations. so i do not quite see how those two can easily coexist. so i think we should not draw too much comfort from extreme examples like singapore. singapore is a great example, but it is a city state. britain, a great nation.

tom: blackrock is a perfect example of an experienced team of managers who convinced young turks to be happy at black rock. .- at blackrock do you have any kind of belief that you can migrate talent and require talent to other cities? philipp: of course. if we had to, we would adapt, and the market would adapt. it is an illusion to think that europe cannot come up with a great financial center. until the 1970's, paris was the financial center in europe. we should not assume -- or if i were the british government, i would don't assume that this could ever change. but london is a phenomenal city, and it will be a painful and long transition. ofhave a large percentage our employees who come from the continent. so one should not forget that either. tom: we will continue right here

with mr. hildebrand third coming up on bloomberg radio, we have a wonderful set of laureates for you this week. a conversation with angus deaton. look for that in the 9:00 hour. it is a day of inauguration in washington. look for special coverage this morning from davos. this is bloomberg. ♪

tom: good morning, everyone. good final morning to the 47th meeting of the world economic forum. francine lacqua, tom keene. that view, just absolutely extraordinary here in southeast switzerland. philipp hildebrand, the black rock -- the blackrock vice-chairman. i want to talk about balance sheet's and the exercise we spoke up with tim geithner and others since 2007. if you build it, maybe you will fix it or solving or delay the crisis or clear the crisis, but then you have to get rid of the balance sheet. what is the hildebrand formula to diminish the balance sheets of too many central banks? philipp: i do not think in most cases your balance sheets get filled up, and in all cases with domestic currency denomination,

it is really not a problem. as long as you do not miss completely the moment of inflation pressures increasing. the average duration of assets held by central banks by and large is probably somewhere three and four years, maybe five in some cases. so the day you stop purchasing further -- tom: you can roll it over. philipp: you just stop and you wait. and every year, a quarter or 20% of your holdings diminishes and disappears. this is unfortunately a story that has taken hold in the imagination, but it is not really a problem. francine: how strong can the dollar b? -- how strong can the dollar be ? philipp: this will be a big question in the coming year, perhaps two. we can draw some comfort from -- i think it has

further to go. if no policy mistakes are made. and the fed will have to normalize, and that will, to some extent, add some further fuel to the dollar. the most important thing in this story on the economic side is that the federal reserve is allowed to do the job it has to do within its remit. what will be troubling is if you started to see any attempt of political interference. tom: thank you so much. philipp hildebrand today, of blackrock. all through the morning on bloomberg television, bloomberg radio, the inauguration. ♪ i think there is a lot of

political peril ahead for donald trump. tom: good morning, everyone. francine lacqua and tom keene in davos, the meetings at the world economic forum thread life goes on in america.

general electric is out with earnings. let's get to taylor riggs in new york. taylor: the first thing i am looking at his topline revenue growth, coming in lower than expectations, about $33.1 billion, down from estimates of about $33.9 million. revenue goes back to -- the forecast had been lowered for that. of after nine months of no growth. as we look at 2017 for the organic revenue growth, two analysts we were talking to say they expect a 3% to 5% revenue growth out for 2017. we want to here about tax reform, and that gives ge a big boost. also about the fundamentals -- some of those big fundamentals we are looking at our oil and gas revenue. that has been a big headwind for the company. we will look on the call to see if that can be a big boost. tom? tom: taylor riggs, thank you so much.

belief ofage by the the rising inflation. the illusion of inflation helps a lot of people short-term, at least. taylor: inflation -- francine: inflation expectations -- you convince yourself inflation is going up, but then the animal spirits -- tom: we will find out if president trump addresses that in his inauguration speech in a number of hours. right now, with ge earnings, we turn to taylor riggs with first word news. taylor: a few hours from now, a journey that began 18 months ago gets to a place few believed possible. donald trump will be on the steps of the u.s. capital, where he will be -- of the u.s. capitol, where he will be sworn in as president. at one point he described his priorities. mr. trump: i promise you that i will work so hard. we are going to get it turned around.

we are going to bring our jobs back. we are not going to let other countries take our jobs any longer. [cheers and applause] mr. trump: we are going to build up our great military. we are going to build it up. we are going to strengthen our borders. said his cabinet has the highest iq of any that has ever been assembled. blackrock ceo larry fink is buckle up may want to for the first 100 days of the trump administration. he spoke in davos. then our conversations with proposed economic teams, they want to be loud, noisy, and strong in the first 100 days. i think that will continue to create some optimism. on the other hand, we still have quite a bit of uncertainty about how we are going to pay for this. thatr: think says he hopes

trade tactics are one of the methods the administration uses. 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: michael mckee and kevin cirilli are in washington for our coverage of the inauguration. , not only with his years of experience with various inaugurations, but also with a real understanding of where america is in its state of economy. michael mckee, good morning. what kind of an american economy will greet the president's morning? michael: actually, donald trump comes into office with one of the best economies any president has inherited. that makes the remarks that taylor talked about disingenuous, the idea that we will get the economy going again. the economy is going pretty darned well right now, with unemployment at 4.6 percent,

4.7%. it is very near full employment. inflation is very low, maybe too low. is pickingnfidence up. we are seeing consumer spending hang in there at a relatively strong basis. all in all, it looks like the economy is poised to accelerate into 2017 before trump even takes office. tom: mike, help me here with the idea of how washington -- republican senate, republican house, republican president -- can address that part of america that is not advantaged by that better than good economy. is that even feasible to do? michael: that is the problem. donald trump has promised a lot of things that will be difficult to deliver at least in terms of of jobs, -- in terms because a lot of the jobs have disappeared from the old rust belt. it is not like he can bring them all back.

almost all of the jobs from auto companies since donald trump began tweeting about it were already in place. it is not like he he is going to immediately do something that help companies decide that they need more workers, and in the united states. it will be tough for him if he is going to try to increase manufacturing employment. francine: doing know who shows up at the inauguration at this point? that businessify ceo's our supporters, or are they just giving him a chance? michael: that is an interesting question because usually supporters -- barack obama drew huge crowds of enthusiastic people. it will be interesting to see how big be crowd is for donald trump. the people in the stands are, for the most part, members of

congress, members of the administration and the executive and judicial branches. and the tickets they may distribute to their constituents, who would support trump on the republican side, might not on the democratic side. when you get beyond the formal area into the mall area, that is when we wonder how many people will actually come out. the forecast is for rain, so that may hold down the crowd as well. tom: michael mckee, don't stand still for too long, or you will become part of the trump administration. hillel mckee from capitol in washington this morning. it is an annual visit at the world economic forum meetings. our guest is at the university of california at berkeley, out of smith college, massachusetts institute of technology. the chart of dollar-peso.

bring up the single best chart in new york. this is mexican peso, 19, 20, 21, now up to a 22%. this goes -- now up to a 22 percent -- 22 print. will president trump because her come -- be overcome? >> i think right now the trump administration is creating effects in the global economy by the president-elect, soon to be president's nonstop statements about it. for example, calling into question company by company and ceo by ceo investments -- are on many boards, and i thought he was just going down tyson's list of companies. laura: think about it.

we have not had that kind of industrial policy where a president is calling up a ceo or president of a company. where the president is continuing to threaten 35% tariffs on products. that has an effect on creating lots of uncertainty. and where you are the subject or the operative act of those threats, in mexico, you will see that -- francine: is that in policy? should he not worry about a rising dollar? lara: i think there is a real inconsistency here. therellar, let's say that is going to be a slightly stronger growth rate in the u.s. economy because of fiscal stimulus combined with some deregulation. so we have stronger growth, higher interest rates because of a change in policy to more fiscal expansion and less monetary expansion. i think it is a stronger dollar. i think it is a bigger trade

deficit, not a smaller trade deficit. the problem here is the macro forces the drive, the trade deficit are going to be working in that direction. francine: does it make the u.s. less competitive? does it make america great again? it is a we argue stronger dollar, obviously that is one of the factors that goes into global competitiveness. the underlying issue on competitiveness is actual -- is actually productivity growth. the economy in many ways has been a strong economy. we have in terms of employment growth, which growth in the last year, in terms of income growth, but productivity growth has been week. i look to see what is going to happen to capital investment in the united states. you studied at the crucible of productivity and technology in america, m.i.t. interpret for us technology now.

one of the themes here at davos -- is it our friend or enemy? it a lot of our viewers and listeners are saying, is this really good for me? i do think that we are probably underestimating productivity growth in the u.s. economy because the products and services we are producing we are not measuring well. we are not measuring the quality or the price. free ine is very low to terms of the gdp. we have a bad handle on productivity. a good thing is that the tech companies and all the companies are investing strongly in r&d because they are driven by how do we change our production, how do we change our products to embody the new technologies? those are good new things for the consumers in terms of a new, cheaper product. the really big challenge -- and i worry about this a lot.

this is a secular challenge that has been with us for a while. i believe it is not job creating, it is jobs destroying. and it is good quality jobs destroying. where is the income? francine: are you suggesting we need to take a step back and stop technology from advancing at the place we are seeing in the last five years? laura: i would not suggest that. i don't even know how you would do it? have a set ofe to the policies that realize this is going on and begin to make changes. i worry about -- i think in many ways in terms of reversals and policies actually is creating a reversal at odds with what we need. there is a lot of churn, chains of jobs -- change of jobs. you do need a health care

system, a portability of benefits that are there. we are moving away from that. tom: i cannot convey enough how important it is for you to publish on technology and change. this is one of the great, great mysteries as we go into this. laura: any increase in capital investment will and body this -- anyogist will emb increase in capital investment will embody this technology. next, francois villeroy de galhau. we will talk interest rates in europe. ♪

francine: it is in operation day in washington, d.c. here in davos, the last day of the world economic forum, we have been speaking with many has headste and also -- many of state, and also participants. now another great conversation that we have been looking forward to. it is with the banc de france governor, francois villeroy de galhau. thank you so much for joining us. i want to talk about monetary policy in just a second. but first, a quick reaction.

what does donald trump becoming president mean for european policies? it is too early to tell. there is probably one strong message here in davos for everybody, including american businessman. this would be a loose connection. also positive elements. going back to what we see from the european central bank, there is a lot of talk on inflation. it is clear the headline inflation is picking up. core inflation is pretty weak. -- long are you ready francois: things going better than that -- slightly better, it is the eurozone.

cutting up, headline inflation, 1.1. we look at underlying inflation as a bit weaker. what we decided in december, after a short and easy to is to maintain our monetary accommodation because we are not yet at our target of , with thelation -- there are signs of progress. we are on our journey to our inflation target.

structural reforms and progress toward economic union are in place. -- our import. tom: the tradition of french economics is a tradition of mathematics. -- tell me what you have learned at the bank of france about french productivity, european productivity, and the productivity donald trump will face in america. french productivity -- it is not very well-known. it is one of the highest worldwide with the german and american one because we have a skilled labor force. we have a good demography and infrastructure. but the slowing down of productivity we have seen everywhere also happens in europe and in france, so we have to make more structural moves. there have been reforms in france, more than what people usually think.

pension reforms, corporate tax regime, a new labor law. but if you want to increase to gotivity and growth into the same direction, we have to implement further reforms looking also at an example of other -- very interesting from a productivity and innovation point of view. a social also cohesion, the growth which is more inclusive with less inequality. this is an interesting example not only for france, but also for other countries in europe. back ae: i need to push little bit on your optimism on europe. we have elections which we do not know the outcome of in france, in the netherlands. we have italy, which is on the brink of being pulled apart by more political chaos. that must have an impact on stability, on employment, and therefore on your monetary decisions. wordois: i did not use the

"optimism." i would use the word "confidence." ecb, one year the ago we said that the recovery was fragile. then we see that it was steady. all signs point to the same direction. i do not feel that the electoral economicl change this mood. but it is not sufficient. we must increase growth in europe and in france through higher reforms, and we have very positive examples in the eurozone of countries which have europe as a common currency, which have higher growth and higher employment and a more inclusive society. this is also for davos an interesting contribution. francine: has the governing council started talking about tapering? francois: no. francine: why not, if there is confidence? we have givenuse

things to our monetary policy decisions from last december, confirmed yesterday. we have given predictability and stability to the economic actors in europe for a full year to come. this is probably, in a very -- this is probably the yardstick of stability and predictability. if we had to discuss in the future what we will do after december 17, you will agree with me that we have time. we halve the hole year in front of us. but obviously we look at -- we have the whole year in front of us. but obviously we look at the inflation figures, not only in the headlines but underlying inflation. and we will look in a midterm perspective because our 2% objective is a midterm objective. a firestorm at bloomberg news with a story on hsbc possibly migrating through the euro star, a lot of

employees to paris. to go to paris, they have got to want to be in paris. what does france do in the next five years not to anglicized or not to be like germany, but to be the france we studied in our history books -- a vibrant, capitalistic france. what do you need to do in the next five years to get those moving bands moving through the tunnel from england into france? francine: what did he study? francois: if i may, the first thing is about brexit. the prime minister's speech last tuesday here in dollars has the merit of bringing some clarity. has the merit of bringing some clarity. we are reminded of a very simple principle of consistency. --means that there can be no access to the single market needs implementation. this will be a significant

difficulty in negotiating any trade agreement. regarding financial services, the prime minister's speech londonean the city of will probably not be able to keep its european passport. then it is up to us in the eurozone, including paris as a marketplace to be very effective with a very business-friendly attitude. i can only say we are mobilized with the financial actors in paris, and we have very serious contacts with them. francine: what other serious risks that the council sees in the next months? where does china figure into this? francois: we said yesterday that on thek remains mainly global picture, so outside europe. so once you mentioned, there could be other ones we spoke this morning about black swans,

and by definition you do not know which they will be. have affirmingwe recovery. we have accelerated. francine: back to inflation. this is something we talked often about on the show. there is a different picture to german inflation. it is broad-based, it is all the countries together. what happens if german inflation goes up suddenly? how difficult is it to put monetary policy together? francois: our mandate is clearly to inflation in the eurozone, and everybody around the table agrees on this. there can be differences. there can be a temporary peak in german inflation, which we observed today. the differences will slightly reduced in the future and 2%ermine inflation under this year. but again, we look at the long

term perspective and it is good for everybody in the eurozone, including the german entrepreneurs, to have price stability for the eurozone as a whole. it is a sign of economic health, and also the german economy. tom: one final question. evolved.as how is the governing board now? is it fractious? is it collegial? is everyone on the same page? how has the evolved over the last 10 years? mentioned, mayu i remind you of one very simple thing? inflation, it is from 2003. at that time, we applied the target defined as it was proposed. today i would say it is collegial and friendly, but i

would not comment more. [laughter] francois: this is also part of independence and a really federal system which works. it is not a one-man decision. it is a very open and friendly -- it is a very open and friendly debate. francine: governor, thank you. we are doing a forex report right now. the mexican peso at 22, with all eyes turned to washington. this is bloomberg. ♪

♪ city, a warmork

daybreak.""bloomberg futures in the united states negative after a five-day losing streak, the longest since election. this,ries look like yields up three basis points, and a stronger dollar, the trump trade. how timely. >> donald trump will become the 45th president of the united states. coverage,ou live preview the next 100 days. soros unleashes harsh words about the future president of the united states. why he thinks donald trump will fail. yeenhair janet