francine: no turning back. theresa may signs that historic letter formally triggering brexit to the delivered to you president donald tusk. the pound pushes lower as investors await a response from europe. we're live in brussels. in talking tax, president trump prepares to be briefed on various ways to implement sweeping changes including controversial border adjustment tax. it morning. this is "bloomberg surveillance ." i'm francine lacqua in london. it is going to be a great show. we will be speaking to the

shadow brexit secretary, the portuguese finance minister, and a brexit committee member. the vice president of the european commission also joins us a little later on. the four we get the brussels, let's get straight to the bloomberg first word news. here's nejra cehic. nejra: president trump will be briefed later on various ways to implement comprehensive tax code changes. he will be presented with possible changes i officials including gary cohn. that is according to people familiar with the meeting. french presidential candidate francois fillon's wife penelope has been charged in the fake jobs probe according to reports by french media outlets citing unidentified judicial sources. her husband has been charged with graft, which he denies. calls to an olivia fillon's lawyer were not immediately returned. blackrock is said to be shaking

up its unit by cutting jobs, reorganizing funds, and lowering fees according to a person familiar with the matter. the revamp moves money into cheaper offerings, with some fees cut by about half. they also said more than 30 employees were let go. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. i'm nejra cehic. this is bloomberg. francine: thank you so much. we're just over three hours from theresa may triggering article 50, firing the starting gun on negotiations as britain seeks to leave the european union. the letter will be hand delivered to the e.u. president at 12:20 p.m. u.k. time and may will address lawmakers in the house of commons at the same time. let's go to westminster now and anna edwards. anna: very pleased to say i'm joined by the labour party shadow brexit minister in westminster.

let me start by asking, we start the clock today, the clock starts ticking -- we understand that perhaps the mandate will be to just negotiate initially on the terms of the divorce. what kind of disappointment would that be from a u.k. negotiator's perspective? >> i think that will be a mistake. i accept that you can't do with the divorce and the new agreement incompletion in the two years, but it is very important that as we go through the article 50 process, we have a clear idea what the future relationship will look like. for me, the ideal outcome is we have a full article 50 deal in two years, we have transitional arrangements, and then we have a collaborative new international treaty that sets out the changed relationship. that will take time, but you need to weave in what the future looks like. anna: yousef out six tests for

the brexit deal. one of those is securing the same benefits as the single market and the customs union. i know where you get that from. that was one of the promises of those who have been arguing for brexit. do you think that is achievable? >> these are tests that can achieve the right deal and we will hold the prime minister to them. that was not just a promise. that was a commitment from david davis. arrangements that he intends to negotiate will give the precise same benefits as membership to the single market and customs union. that is his commitment made in parliament. anna: some time ago you might have argued that would not be an achievable expectation. >> i argued passionately to stay in the now we have to argue to get the best future we can for our country. we have set tough tests, but we are talking about shaping the

country for generations. you would expect them to be tough. but the government has said it can achieve, and that was no other than the secretary of state for exiting the e.u. in parliament. after today's proceedings, we hear from the government on the great repeal bill, whatever it won't be called. >> it is very much about repeal. anna: under what circumstances would you vote against that? entrenchingea of all the rights or protections we have because of our membership to the e.u. is a good idea. our ask of the government is that all those rights are entrenched in full without qualification, without limitation, and without that after five years they all fall away. we are arguing that all of them are put into legislation. anna: theresa may said she wants to protect workers rights. >> i want to hear more about

environmental rights and consumer rights and human rights and i want to hear more about how they are going to the enforced. we will be absolutely holding them to account on that. anna: if there's too much latitude given to ministers in translating the law, then labour party could vote against that? wouldn't that risk an early election call? >> if there are rights and protections in play, they should be put into our law and they should not be capable of being taken away without the involvement of parliament. i don't want to see secondary legislation which doesn't have all the qualities to that effect. as for the early general election, the prime minister is serving article 50 today. there's two years of intense negotiations about the future of britain. i think the prime minister needs to focus on that. anna: what the labour party back

it if there were to be a call? a month, six months, two years, three years, of course the labour party will be ready for an election. days think today of all the focus needs to be on everything that has got to be achieved in the next two years. anna: are you still in the labour party considering some kind of federal solution where scotland manages to stay in the e.u.? >> our leader in scotland has been saying for some time, and i think there's a lot in it, it is not formal policy that we've adopted. there are discussions about how do we ensure that power is in the right place. i think what the referendum told us is that many people feel very distant from politics and politicians. we need to change that and to empower people in a different way. anna: keir starmer, thank you for your time this morning.

joining us here in westminster. francine. francine: thank you so much. anna edwards with the shadow brexit secretary in western. the u.k.'s departure from the european union will be the first time a country has quit the bloc's six-year history. portugal's friendship with england dates back to 1386, making it by some accounts the oldest alliance in the world. with me this morning is the senior minister of one of those nations, the finance minister of portugal. welcome to the program. thank you for joining us. this is an important day for europe. in the divorce proceeding, you have to look at yourself and say, what did europe do wrong? what could europe have done better and will article 50 change europe? >> it is an extraordinary day. we are entering and we have to understand that somehow uncharted waters. thinkk europe needs to

about this event and consider ofengthening and completion europe. i think this is what is needed at this state. to allow citizens also to way toand what is the get out of this difficult situation. francine: minister, portugal has gone through a three-year bailout program. there are still concerns about nonperforming loans and other issues. do you worry that brexit will weaken portugal if the eurozone gets weakened? , we cannotlenge is forget it. as any challenge, there is an opportunity here as well.

the opportunity is precisely for leaders in europe to understand that you need to give a step forward and as i mentioned before, complete the banking union, complete the instrument that allows very strong economic area, because the euro area today presents really good results in terms of fiscal situation of external trade position. it is a very strong market, very strong economy, and it has to portray itself as such. if we are able to do that, we can certainly cope with brexit, with protectionism coming from the u.s. administration policy stance. if we do that, europe -- [indiscernible] that will make also the brexit process easier, because if s economics it

position, its power in terms of markets -- francine: minister, are you not concerned that article 50 gets triggered and you are talking about banking union, and this would spare other members within the eurozone to want to leave the bloc, so we have a disintegrated europe, and what does that mean for npl's, nonperforming loans, it also for the portuguese economy? >> being member of a monetary union, if that monetary union courseisintegration, of we will be affected by that. what i was saying is that i don't see at this stage a risk of that happening, and on the contrary, i think the union, the monetary union has such a good economic condition, economic

growth is picking up, the fiscal position of the euro area is have the economic situation to be able to cope with the challenges at hand. of course this needs to be very clearly stated in terms of the political process, because the referendumthe u.k. whether resulting european elections are pretty much the result of people not fully understanding what this precisely meant and what is the goal, the ultimate goal of the policies. francine: a lot of investors are concerned about debt and they are concerned about portuguese debt, italian debt. can portugal grow out of it debt burden? >> it's something that we are

very much focused in. we are generating primary surpluses. in 2016, we will have a primary surplus above 2%, 2.2%. the projection for 2017 is close to 3%. our economy is accelerating. these are the main ingredients for that equation that you need to deliver. we are doing that. we are in a position to be able to leave the excess capacity procedure. this will be an upgrade on the situation of portugal, on the credibility of our public finance, and we are stabilizing the financial sector. ago, you back one year will see several problematic institutions in the banking sector in portugal, and we have been able to fix each one of these difficulties, and we are now about to close the deal on

-- francine: you've done two capital increases. nova bronco is about to be sold. is there anything you can do to deal with nonperforming loans? that we facede was a very challenging one. first of all, we need to stabilize the banking sector. each piece of the banking sector , you mentioned the capitalization of several banks, with foreign capital, attracting foreign capital in 2016 was a major success, and very difficult in europe these days to capitalize with banks, and we were able to attract, actually, capital from all over the world, to our banking sector. -- i mean, these

interventions, this capitalization of banks, we are now able to face the npl challenge better, in a better position. say, that the very strong capitalization that is going to be closed today precisely will bring the capital ratios positive, the largest bank in portugal, to levels that will make it much more easier to l's. with and be -- with np they are now in a much better position. [indiscernible] they have now the capital to deal with it. francine: going back to brexit, you told me you think the european -- the eurozone will be much stronger if it comes together post-brexit. what kind of relationship do you see being cemented between the u.k. and the e.u.? will the u.k. have to pay the 50

billion jean-claude juncker was talking about? >> that brings me back to the uncharted waters. we are dealing with issues that no one considered before in a very detailed manner. u.k. for our economic future. important tos very economy close to the european economies. it is not only the very long alliance that we have with england. key for our-- it's firms, for our workers, for our economies, for us to stay close. francine: have you had any dealings with the government here, telling you privately that

portuguese citizens living in the u.k. can remain here? >> we are pretty much sure that that will happen. issues thatere are can be raised on that front, but we think it is very important for our societies that are based on free movement of goods and services, and of course also and to to stay together face the future with great prospects. of course in the end of the it to rules, but we want be a successful process. francine: thank you so much, minister. great pleasure to have you in the studio. the finance minister of portugal joining us. we talked about banks,

nonperforming loans, and brexit. turning today, the "what did you miss" team will take a look at populism changing the dynamics of the global economy. they will speak with experts on nationalism including citigroup's chief global political analyst, jean-claude trichet, and the former italian prime minister. if you are a bloomberg customer, you can watch the show using tv . you can ask questions by going underneath the video screen right there. you can click on this, ask the guest a question. you can also follow our great chart and analysis. after the failure of president's health care bill, talking about president trump, what does the future hold for tax reform? we will discuss that next. this is bloomberg. ♪

francine: this is "bloomberg surveillance." president trump will be briefed later on various ways to implement comprehensive tax code changes. he will be presented with possible options by administration officials including gary cohn. that is according to three people familiar with the meeting. optimism in the strength of the u.s. economy has been rekindled after consumer confidence climbed to its highest level in more than 16 years. federal reserve chairman janet yellen says challenges remain in the labor market, including concentrations of elevated joblessness in poor and minority

communities. >> while the market for the united states as a whole has improved markedly since the depths of the financial crisis, the persistently higher unemployment rates in low income and minority communities show why workforce development is so essential. today, a with us professor at henley business school. thank you for joining us. -- will who talks about you play a part in the trump administration? have you had any discussions with the president? >> the discussions continue. it is to be determined. francine: but you are close to the president. >> i talk to people in that circle quite regularly. francine: what would be your focus, or what would you like to serve as? >> my background is in international economics.

certain things in europe have been on the horizon. francine: trade, is trade the one thing that the president needs to focus on? >> yes? francine: political economy meaning what? >> relations with other big blocks of countries. francine: is he changing the way we do diplomacy? >> i think he is. clearly more will run out of the white house then out of the state department, as it has in the past. , which that his views are clearly articulated on economic development, on trade, on security, will be foremost in the administration. there are different pockets of power in commerce, in-state, in other agencies, in the national security council, but the president is front and center in all things. i do need to ask you,

as there were certain allegations of things around you. have you discussed that with the president? >> i certainly haven't discussed that with the president or his inner circle. they are petty allegations that we've basically challenged and most of them are in fact false. francine: does the u.s. gain from europe breaking apart? >> no, and i don't think the u.s. has a policy to break europe apart. view, security point of we want a very strong partner in europe. wem an economic perspective, want a strong trading partner in europe. whether that means that all countries have to be part of the same entities or not is certainly to be determined. in the case of nato, i think the president's opinion has been more forceful than in the recent past. i think he's even changed his mind on nato and said it has very strong prospects. we've never had the opinion that

all countries need to belong to the european union. we have relations with all the countries in europe and we also have strong relationships with brussels. francine: what do you think the most fragile will be? is it china? >> if you are looking globally, the key hotspots of course are the china relationship and of course with most controversy, although it is a less significant economy today, the relationship with russia. francine: we will get back to that and talk more about russia but also focus on article 50. ted malloch. we will also look at pound. this is bloomberg. ♪ careful joe, they've got you outnumbered.

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something for everyone is awesome. find your awesome with the xfinity stream app. more to stream to every screen. thank you so much for that down home welcome. show me female vocalist of the year. thank you so much. thank you so much acm's, i appreciate it. show me acm best moments. i could never have wished for, asked for and dreamt of anything more than this. catch your favorite moments from the acm awards and an exclusive encore performance by kelsea ballerini following the show on xfinity x1. the acm awards. live on sunday, april 2nd 8/7 central on cbs. is brexit,his article 50, what's next. let's get straight to the

bloomberg first word news. here's nejra cehic. nejra: donald trump has issued an executive order rolling back his predecessor's carbon cutting commitment, promising a new energy revolution in fossil fuel resources. he's unwrapping rules and directives to combat climate change that president obama made a central issue. trump has called climate change a hoax and wants to reorient policy to help oil and coal producers. >> we've already eliminated a devastating anti-coal regulation but that was just the beginning. today i'm taking bold action to follow through on that promise. my administration is putting an end to the war on coal. clean coal, really clean coal. president trump will be briefed later on various ways to implement comprehensive tax code changes. he will be presented with possible options by officials including gary cohn. that is according to three

people familiar with the meeting. francois fillon's wife penelope has been charged in the fake jobs probe. that is according to reports by french media outlets citing unidentified judicial sources. her husband has been charged with graft, which he denies. calls to penelope fillon's lawyer were not returned. blackrock is said to be shaking up its struggling unit by cutting jobs, reorganizing funds, and lowering fees. according to a person thin milieu with the matter, the revamped moves money into cheaper offerings with some fees cut by about half. they also sent more than 30 employees were let go. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. i'm nejra cehic. this is bloomberg. francine: thank you so much. prime minister theresa may has signed it and in less than three hours, the triggering article 50 will be delivered to you

president donald tusk. what will it mean for the rest of the european union? let's get more with ted malloch. professor, let me bring you over to our brexit barometer. great work by the team upstairs with simon kennedy. basically it shows what has happened the last 12 months. it is designed to show the impact of separation process on the u.k. and it is made up of indicators including employment, inflation growth, and uncertainty. today we are at 30.7. this is where we were in the last couple of months. we were negative territory, going down to -10, when brexit first started or the referendum happened. then it went all the way to 50. what do you think the barometer will look like in a couple months? can they make brexit a success?

ted: i like these kinds of measures. i think you will see in the next couple weeks, let alone couple months, the scale loving way back up in the positive. you will have the uncertainty begin to go away. i think great britain becomes great britain again today. you trigger something that puts them back on a path where they can control their own economy. outsider, i'm not british, i wasn't involved in the campaign, i would say it is an exciting time for great britain when it can restore that kind of economic viability. francine: what happened in scotland leaves? >> i do nothing scotland will leave. it is really an unnecessary vote. quebecd viewers that in you had the same kind of referendum four times for quebec separating from canada. every time it was defeated. francine: you think there will be a referendum? >> there could be a referendum

at some point in time. more than a few years. the resounding view on scotland, where i spent a great deal of time, outside of the pockets in glasgow and dundee, is to be part of an exciting british future. francine: let's take the other side of the coin. what does it mean for the eurozone? you said you think it is the end of the european project in terms of the euro, the single currency. ted: britain wasn't in the eurozone, so the impact on the eurozone is not dramatically affected. francine: the thinking is that it leads to more populist votes. we will see what happens in these other elections that are forthcoming. my view is that the european project is certainly in question. the eurozone has its problems. francine: but ignited by brexit? ted: i think that brexit was

certainly a spark, a catalyst, but the problems are there. frankly how the treaty of rome is being interpreted in its latest variations. --o think as an outsider this is a divorce, clearly. divorces are ugly. they are messy. sometimes they are costly. but if britain can make it a clean divorce and make a more certain future about its global relationships in the future, with all those other partners including china, india, the commonwealth, that is where i would be spending all of my energy, not trying to do sour grapes with europe. i think europe will come around and want some relationship with the very resurgent united kingdom. francine: do you worry about a timeline? what i hear often is the u.k. could have great relations with

china in terms of trade, with the u.s., but this could take 10, 15 years. ted: i think that is a misnomer. this view the trade negotiations need to take seven or 10 years is something we can basically overcome by having more expedited talks. the prime minister has said she buts nothing off the shelf, if you take some things off the -- thend customize them, americans have said we could have a trade agreement with the u.k. in nine months. that is very optimistic but i think it can be done if you get the right people in the right room with the right political impulse. they have to be told by the prime minister and the president's to get this done. francine: and the president wants this. ted: the president wants this as much as she does. francine: ted malloch, great to have you in the studio. thank you for coming in. the ceo of the roosevelt group. coming up, still to come, brexit

committee member dominic ron and the vice president of the european parliament. we will be talking about article 50, but also about how much money the u.k. would be willing to pay to still have a special relationship with europe. don't miss my, interview with the italian finance minister. we will also be talking about banks, nonperforming loans, and politics in italy. this is bloomberg. ♪

i'm francine lacqua in london. this is "bloomberg surveillance ." let's get straight to your

market check. here's mark barton. mark: good morning. there's only one game in town, the triggering of article 50. european stocks rising for a second day. the benchmark just below its high. you mentioned sterling. this is a bit of a history lesson. top to bottom, the closing low 120.47.ry 16 was the intraday low was on october 7 last year. remember the flash crash. since the start of october, the pound has traded in a 5% range of 1.20 21.27. analysts forecast 1.21 in the first quarter. lenders bank has a 1.09 forecast. hsbc and commonwealth bank of australia, 1.10. investec forecasting 1.35. there's sterling since brexit.

wonderful chart showing three main equity gauges in the u.k. since brexit. you know what happened in the days after brexit. the ftse 250 sunk. it reversed those losses in early august. it has been setting new highs since october. similar story for the ftse 100. they've moved on to record highs. from here a lot is going to depend on sterling. a lot is going to depend on the negotiations on business and consumer confidence. this is the 10 year yield. we fell as low as 51 basis points just after the bank of england slashed interest rates in august. implemented further qe. since then, we've gone above the brexit starting level. now we are at 1.18. just remember the move was in conjunction with a global move up in yields.

the reflation trade started well before trump. 1.37 was the day of the brexit vote. francine: thanks so much. where less than three hours away from the official triggering of the brexit process. let's get back to westminster and anna edwards. anna: i'm pleased to say i'm joined by conservative mp dominic ron, who sits on the brexit select committee. bonnier only wants to talk about divorce, separation of the u.k. from the e.u., what will the government's response because that? >> in fairness, he has made clear that we can deal with this in a twin track approach. we probably need to get off on the right footing, to make sure we understand the principles that will inform those tracks. anna: our understanding is that perhaps he would be given a mandate to talk about the

divorce proceedings initially. >> that is not my reading of events. i think it would be odd if we only don't with one specific aspect. we're not calling it divorce. the truth is we go into these negotiations with a stronger economy and political ambition. that means looking at it from our friends' point of view, making sure the choreography works for them, and offering the best deal to give us the best chance of a win-win at the end of this. good for the u.k. but also for our european friends. anna: what will that cost the u.k.? it is an irresistible metaphor, the divorce, that the media insist on using. what kind of settlement are we looking for? what amount of money are we talking about to get past that first hurdle and move on to those things that you can government would like to talk about? >> we've had a bit of posturing on the question of some sort of exit bill. it is not backed up in any basis

in a you law, either in terms of what the obligations would be, or how you would resolve any dispute. we will wait and see a bit more detail on that. the one thing we know is we get our net contribution back which is in excess of 10 billion pounds. but i don't want to turn this just into a handle on the bean counting and the money, as important as that is. i want to look for the win-win, not the lose-lose, around trade, military cooperation. also, commonsense immigration arrangements. anna: around trade, i spoke to the food and drink administrator, and this is an interest rate that has -- an industry that has a lot at stake. they used one example, a bottle of bailey's. the milk that goes into that made around the land for, they say the milk crosses the border

eight times. how do you guarantee that industry frictionless trade? >> one of the things we want to achieve is a bespoke customs agreement. let's also face it. britain needs to get better at producing its own. that is an opportunity as well. if you look at the issue in the round, cb&i, not known for its brexit inclinations, found that confidence in manufacturing businesses in this country at a 20-year high, and we've just had the global financial index out. london remains top. the others have dropped. paris is battling for 29th with casablanca. anna: what about the charm offensive that some people suggest is needed? what will the tone be in the letter? have you seen the letter, had any inklings as to the tone of it? some of the markets are looking for that. >> tone is crucial.

if you look back to the the primehouse speech minister gave, the emphasis is not just on the haggle. it is on the opportunity. opportunities for the u.k., but also our e.u. friends. moreow that you exports than we export to them. there's a clear win-win in maintaining free trade. the services industry is pumping in one trillion pounds into european companies. those are areas, and on financial services, the e.u. and the u.k. side see the scope of that win-win deal that i think is absolutely important. anna: there is also political reality and many in the 27 in europe don't want the u.k. to have the ability it has now as a matter of principle. then what would be the point of being a member of the e.u.? >> actually there is no other

corner of the world, country or region, that engages in free trade with the concept that you pay a fee or open your borders in order to do so. free trade is about the mutual self-interest. i'm not going to get into all the political shenanigans. i do think we need to understand there are all sorts of existential challenges, from the greek situation, italian nonperforming loans, elections, that will preoccupy the e.u. brexit is a distraction for them, all the more reason for us to get the tone right but also focus on win-win. anna: thank you so much. dominic raab joining us in westminster. francine: anna edwards with the brexit select committee member in westminster. up next, the view from the continent with the european parliament vice president. we cross live to brussels. then we expect the head of the european union, or the european

union president, donald tusk, to address his people at 12:45 u.k. time. toshiba projected an annual loss that could be more than double. that is around $9 billion. this is after its u.s. nuclear unit filed for chapter 11 bankruptcy in a new york court. we will keep a very close eye on that news conference and bring you any breaking headlines from that. this is bloomberg. ♪

francine: this is "bloomberg surveillance" on the day article 50 gets triggered. i'm francine lacqua in london. the u.k. triggering article 50 start a clock on a negotiation period. at the end of the process, european parliament will hold a veto on any deal that has been agreed if it believes it is not in the best interest of the e.u. let's go to brussels where matt miller is standing by with the vice president of the parliament. that, over to you. matt: thanks very much. thanks for joining us.

let's talk first about what you expect from this letter today. and do you expect to see what kind of response do you expect president tusk to deliver? first it is quite remarkable -- >> first it is quite remarkable that it hasn't been leaked yet. what i expect is an open position of the u.k. government in terms of the negotiations. and then of course, the reaction will come when the heads of state and government meet to react to this opening of the negotiations. matt: what do you think the most important points are going to be? there's been talk about a 50 billion euro payment that the e.u. once the u.k. to make. >> these are unsettled bills and commitments that the united kingdom has made in the past. it is essentially open bills, not a bill for brexit, but money that is flowing anyway. britain can expect some payments

to come back from brussels as well because it will be a member for another two years. large, i think the most important issues will come later in the process, but market access in free movement of capital, goods, and services are no longer available to the united kingdom following its exit from the largest single market worldwide. the e.u. is bigger than the u.s. or china. people forget that. the trade issue is going to be a massive one. we have a story on the bloomberg saying that task is setting guidelines to negotiate brexit before a trade deal. do you think that is the right order? >> there's the divorce settlement, then the settlement about how you interact following the divorce. i think that is right because you don't want to have package deals between these two complexes. they are not intertwined really.

let's settle the divorce issues first, then negotiate a constructive art mayorship. look at the district -- the different industries. they all need to know what is going to happen. what is the market going to look like? you can't mix this up with pension payments or structural funds. matt: financial services is a huge one. how do you think that should end up from a european spec active -- european perspective? >> i think that is for the banks to decide. at the end of the process, certain operations can no longer be handled in london. they are subject to european supervision. these banks will relocate their operation to frankfurt or paris. i think it is a business decision following the reappearance of certainty. there's a lot of uncertainty. there is a fog over these

negotiations. matt: do you think this can all be done in two years, the brexit negotiation and trade negotiations? we're hearing that it official guidelines won't even be set until april 29. >> the short answer is no. i deal with trade issues. i talked to negotiators. ever finishe you something this complex in less than two years? they say no, not five years. there's going to be some uncertainty in the marketplace for another 3, 4, 5 years at the very least. matt: do you think the u.k. needs to be, i don't want to say punished, but do you think a message needs to be sent to other e.u. nations that you can't just leave so easily? >> i disagree with that view. is not about punishing the u.k. it was a clean democratic decision. if you want to leave, you leave,

but it is of course not a political decision. if the economic fallout is negative, that is an economic reality. if you leave the largest single market, of course you shoot yourself in the foot and there's going to the negative fallout. much.thank you so alexander lamb start, vice president of the european parliament. francine: thank you so much. great interview and great to hear from one of the people closely involved with what happens next. we also hear from donald tusk leader on. we have prime minister questions starting in three hours and then the letter will be handed. "bloomberg surveillance" continues. this is bloomberg. ♪

francine: theresa may's brexit letter makes its way to brussels

. chancellortable, hammond says he does not recognize the exit bill. direction after his health care defeat. good morning. i am francine lacqua. article 50 is here. what this focus on means. the clock is ticking for two years of negotiation. i need to bring your attention to corporate news. orsayk about deutsch of could merge. we are hearing they have blocked boerse's takeover. a gave a little bit of support

to the validation of brexit. tom: perfect timing to see the tension here. believe with the drama of this morning and the signing of the letter by prime minister may, this is what is to come, small stories like deutsche boerse. francine: we need to focus on this. i don't know if this is a political decision. it could be on grounds of too much concentration and not enough market participants. happens,through what all of the u.k. and press are in her and brussels to figure out the tone of the letter theresa sending to donald tusk.

it is very guarded. of course, the eu response, the first comes in about 2.5 hours from now when donald tusk responds. tom: we will see where we go through the day. we will have that across all bloomberg platforms. francine: here is taylor riggs. >> a we are going to start with brexit. the talks start today on two years of brexit negotiations. may's letter invokes article 50 of the lisbon treaty's. all signals are that it will be a tough negotiation. briefed on the options for tax reform. people say his chief economic thoser will be among

conducting the briefing. be proposal that will presented is the border adjustment tax, that will replace the corporate tax with a 20% tax on domestic companies sales and goods. neil gorsuch needs 60 votes to be confirmed. if democrats try to block his confirmation, republicans can change the rules of so a simple majority vote is required. day innews, 24 hours a more than 120 countries. i am taylor riggs. this is bloomberg. right now, equities, currencies, commodities, i will call it stability. jostling around 11.59. a better tone to the market.

the 30 year bond, that color is wrong. it should the red. there is sterling. francine, you can talk about brexit sterling. thing i care only about is sterling falling in early asian trade. need to take a step back in trying to understand what is priced in and what is not. there is short positioning on pound. sayign-exchange strategists it is short,s maybe we are underestimating the fact we are bracing for the worst, hoping for the best. psychologically, we need to see where the market is positioned. your -- areating a to

two year divorce from the u.k.. can you talk us through what happens at what time? >> the letter traveled across over to brussels and is delivered by tim, britain's ambassador to the eu. when that happens, that is when the clock starts ticking. that is when the two-year timeframe starts. i caught up with hillary, who chairs the brexit committee here. some people are questioning what kind of deal can be achieved. some suggest no deal would be

better than a bad deal. that was not his view. a >> i disagree with those who say no deal would be better than a bad deal. no deal is a bad deal. it would be the worst deal of all. >> what is the tone of the latter, how much does it set out the priorities. tom: i understand there are eight flavors of tories. give us that dynamic right now on that important day. >> it has not escaped attention remaindersa may

during the campaign. are looking to hold her to account, making sure she stands by her phrase. on the other side of the party, there are others who have been campaigning for something that looks like brexit light. even in the wide community, an brexition around a hard seems to be where people are coalescing. there is a possibility we could -- there are people asking, could she go for another general election in the u.k.. that is not on the cards at the moment. francine: thank you.

we will talk to and throughout the day. sebastian, jeffrey, thank you. have moved on to the role of a facts, but it gives us a good sentiment of what the market is bracing for. this is pound net position. is the market to bearish? not as much as much bad news as expected. >> it is the consensus now, a hard brexit. you can define it in many ways. it is very interesting, given the two positions. upsides a slight

surprise. it seems like the knee-jerk reaction is to fade any rally. do you think there is a bias in the market? may back to when theresa said she would trigger article 50, there was a huge downside to pound. >> if we look at the purchase offense of fx markets, people who want to treat sterling as a perform,how it will that is where the short bias is. people are willing to take the other side of it. sebastian, on the day of the inauguration of trump, you

wrote an essay for the washington post, this morning, --ma talk about malady's llaby's shocking calm. leadership there to drive these negotiations forward? ofthe best hope in terms european leadership comes from germany. to holderkel is going on to her job in the fall election. germany will remain the anchor of the process. it cannot drive consensus by itself, but it is the closest thing we have. tom: we saw the headline go across about a stock exchange merger that will not happen. will this divorce be ugly or are we going to hire an arbitrator that is going to get us through this without breaking the china?

>> if you can imagine how nasty divorce is between two people, now, we have 28. that makes the process complex. divorce is an over comforting analogy. aboutught to be talking the 28 parties. it is more difficult. francine: i say what -- we can call it a silly merger. we have a bit of news from the european commission, saying she blocked the bid for the lsc, saying it would have led to a monopoly. i am not sure of the politics.

i am not sure politics here come into play. will people move out of london? do you look brexit at? we are going through the numbers. overall, what will the u.k. look like in 14 months from now? >> at people are under emphasizing the rules on migration. he u.k. want control over the border. they have not said what they do with that control. is saying maybe we will allow people to continue coming in. takes control over its border and operates a liberal immigration policy, that is more upside for the economy. tom: help me with france. do we want to see president le pen signed the same paper prime minister may is signing?

does france want to see a president le pen sign the same document as prime minister may? opinion polls across the european union show the french are often more critical and dissatisfied of the eu than the british. you cannot rule this stuff out. it is quite unlikely she will win. you have to remember, for britain to leave the eu, not being a member of the single currency was way more simple than anything in france. to leave it, you have to rip everything up. that is a horrible trauma. i don't think the friends are coming out -- the french are coming out. francine: we do need to talk

about your approval rating. looking at the markets and a little more euro movement. we want to ask about pound-swissie. this is bloomberg. ♪

tom: good morning. our special coverage today of this momentous day for the united kingdom. right now, maybe we digress a little and talk about the

reality of tax reform in the united states. it wraps around the president and his advisers. one advisor way out front. relationshipthe back to 1986. i have a chart here. there is the chart. trump has tort carry around in his golf bag. this is a big deal. debt to gdp,eagan bush senior, here is the clinton reduction of debt to gdp. up we go with a debt explosion with the president. here is trump. this is not the same balance sheet. >> that is true.

you have to do tax reform and a way that is responsible. it makes it difficult to get it through the budget process in congress. anyone who believes the health care reform was easy and that tax reform will be easier, they have another think coming. francine: will that play out? there is the end of the reflation. >> it is much more in the equities space. .lients have benefited at this point, after the events it is embedded in the price. is it sustainable? how much can you push through? if we get more details

on tax, could that mean equities go higher from here? >> our target is yes. people don't need to see immediate change. they need to see a path towards change. they health care reform is compressed in the space of weeks. got cold feet. is there going to be a new improved -- a new approach? tom: there are various republican elephants in the room. weeks ago, we were talking about the border tax. is the border tax dead? >> it will be tough to get it passed.

costs ons massive specific companies. they had j hughes -- they have a huge incentive to lobby. anytime you attack special interests, it is tough to beat it. i am not holding my breath about getting this done. tom: thank you. he is with the council of foreign relations. we will continue monitoring pound sterling. we will speak with --. what a privilege to speak to the professor a few days ago. york, and a brexit london, this is bloomberg. ♪

francine and tom from london and new york. we need to talk about blackrock. they are reorganizing funds and lowering fees. it comes as competition grows. and geomoore is with us ffrey from ubs. the blackrock distill industry? in this

>> it is the biggest asset manager and reflects some of the pressures in the industry. you see them moving them of the assets into passive funds, then trying to differentiate between the active and the passive side. to fivey have gone down point whatever percent. where is this in five years? where is active management in five years? this trend shows no signs of stopping. seeing some other asset managers merged together to get scale. at black rock being the biggest, that is not as much of an option. you will see this trend continue.

will lose is the middle ground. they will be highly active and highly passive. francine: we will be talking about market moves and article 50. one of the things we are trying to explore with tom, where do they go? we will try to get a take on whether the two-year negotiations can be done in two years. this is bloomberg. ♪

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tom: i remember the quiet of london on june 24. the morning after that historic vote. it was extraordinary as an american just to see the

numbness of the remain london as the rest of the country as a generalizeation said no, we will go. the prime minister signing the document today. 10 down street awaiting the ceremony of a hand-sign letter taken to brussels. math your miller is in brussels. we'll get to all of this in a moment. here is our update news. >> let me give you an update on's event. it is a divorce that will define the u.k.'s relationship with its trading-mile-an-hour. theresa may starts to process today. now britain begins a legal battle over trade money and immigration with 27 other governments. meanwhile the u.k. government says it will not be entering negotiations on the scottish government's call for a second referendum on independence. scottish lawmakers gave their

approval for another vote in the pring of 2017. president trump wants to lower ug drug costs by approving chiefer generic eric drugs. in south america, the worgs may be over in brazil's meat-packing scandal. they are the latest to lift their restrictions. there were reports government inspectors were bribed to allow tainted meats to be exported. powered by more than 2600 journalists and analysts, i'm taylor riggs, this is bloomberg. francine: thank you so much.

frankfurt is merging as a favorite destination for investment bankses such as goldman sachs. joining us now is anthony browne and also with us is geoffrey yu of u.b.s. spoke to the portuguese finance minister making the case why bankers should move to portugal. who is going to move to when and where? > they might move to make sure they can carry on serving customers. lots of countries coming to london with sophisticated pictures. i think as you said in the beginning, frankfurt is a favorite option for many because

some have some operations there already. it is simpler to augment those operations in whatever way you feel they might need to do. >> francine: you speak of the financial services, the bigger banks, mortgage brokers. what are they bracing themselves for when it comes to brexit? is it clear financial services will be a priority and we will get a hard brexit? >> what we're focused on is the day after we leave the e.u. in two years. we want to make sure the banks facing the u.k. can continue serving their commerce. there are various ways that can be agreed or we mentioned the rate that only applies within the single market. having a mutual access agreement. the critical thing here is both

sides must want it to happen. if both sides want it to happen, it will be easy to arrange. if one side says we need to make it more difficult to trade across the channel, there is a risk won't have a proper grem. trying to plan ahead, you have to plan for the worst. the worst scenario is we don't have an arrangement in place for 2019. hope for the best but plan for the worst. francine: i have heard everything from 400 jobs being lost to 290,000 jobs being lost. >> i don't think they know. there are so many different scenarios. when the negotiations unfold, we will get a clear indication of what might be happening in 2019 where whether we get some type of implementation period or bridging arrangement that avoids that cliff-edge effect at the end. what we have asked for as an

industry, an early agreement, to ke sure there is that and if get that agreement, it will make it easier for banks to plan long-term. they might need to move a little bit of operation to dublin. if they have trading operations in frankfurt, they might want to move some trading operations for example. the banks are going through all of those options at the moment looking for legal ways to continue serving commerce. banks are keen to -- they live in london and have homes and family and kids here and generally want to stay here. you mentioned portugal. the staff are angling for madrid. francine: better weather. tom: anthony, with you being the oice for the british bankers

association and morgan stanley over the years, you have to convince me if the brain power wants to leave london. i see absolutely no evidence whatsoever that the brain power of banking wants to leave london. are they going to go? i mean, what is the actual plan going to be to move the people that make the bacon out of london? >> that is what the banks are looking at at the moment. which staff do they need to move? what functions? sales staff? back-to-back operations that carry on doing the hard work as it were in london or do you need to move more senior decision makers? there are lots of different options and ways of arranging things. that's what the banks are actually looking at at the moment. that's why when asked how many jobs are going to move, we don't know. it depends on which scenario and

that will depend on a business by business basis. you might do something different for your trading trations than maggot operations. tom: we have seen the idea of two major banks having to renege on expension control. they had to pay extra quiet bonuses to keep people. to me it is banking as usual. will we see mergers? the basic idea has to be synergy. will we see mergers? >> will we see mergers? i can't comment on whether there will be mergers or not between the banks. one of the risks of brexit is it makes a lot more expensive doing banking. if you split things in two you'll have one operation in london and one in frankfurt with separate i.t. systems and it becomes more expensive serving

commerce those business lines could become less profitable. they need to reduce capacity as a result. there could be business lines that are profitable come brexit or it is no longer possible to make money and they exit those businesses altogether. that could lead to some consolidation. francine: what is the impact on the banks? we will not ask you if you will move to frankfurt or madrid where the weather is better. does it have immediate implications bottom line? >> just looking at the financial sector as a whole, a lot of technical changes and when we think about it, the answer is always going to be somewhere in between. end and it is not going to be zero either.

the more flexible, the more resilient you are. for the u.k. as a whole, financial services, are we going to find new industries for london to replace that? francine: geoffrey thank you so much. geoffrey from u.b.s. and anthony browne from b.b.a.. the british bankers association. i almost made it into a spanish company. you'll hear from the italian finance minister and the future to have european union and how talent.ded to attract this is bloomberg. ♪

francine: this is bloomberg "surveillance." i'm francine lacqua in london. tom keene is in new york. we were talking about the brexit and the impact it had on the u.k. banks. and one of the other things c.e.o.s are terrified of, u.s. banks being over overly underregulated. too much regulation would lead to these banks worldwide not being on a level playingfield. we're back with anthony browne and also still with us geoffrey yu of u.b.s. if you look at a c.e.o. that could be near london, do they worry more about the u.s. and forgetting the rules and going about it alone than they do about brexit? >> they are very keen to make sure we have a level playing field around the world. and that actually had the same global standards and

regulations. not forget for the financial sector and banks and their customers is if you have different rules in the u.s. and the u.k. and the e.u. and japan and they have to operate in different ways in different pleases. some businesses may be profitable in one place and not the other. and then people trying move their business from one country another because they have different r.g.e. regulations. it doesn't have on the identical. francine: do you believe the u.s. could go as far as pulling out so that the stocks of u.s. banks will largely overform european ones? >> there is a risk to the race o the bottom here. the u.k. should not undersell its cape blingts when it comes to getting regulation right. you look at china, they are trying to copy the model here.

how will the u.k. monetize? that remains to be seen. i think it is a compromised solution. >> we said straight after the referendum, we don't want a & bonfire of regulations here. tom: help me out here, geoffrey. you're a bright guy. it seems to me like the brain power is under assault whether it is the blackrock management news or what fidelity is doing and what all of these banks have to do with their brain power, it is almost like brain power in retreat. can you tell a young turk to work at u.b.s. these days? what do we do about all of the smart kids coming out of school that want to go into finance? are the jobs going to be there? >> i have not worked anywhere in my life apart from u.b.s. i welcome anyone to join our

firm. as a bank, as any institution, as a country in the u.k., we have to innovate. we have to be flexible. if jobs are going to be lost to we need to innovate and find reasons why that is happening and try to deliver as well. francine: buzz the weaker pound actually help the -- does the weaker pound actually help? >> it helps some and disadvantages others. if you're in the export industry, that helps. things like tourism, there are have been things about tourists in london spending because suddenly london has become cheap. if you're an importer, costs go up. some of us win, some of us lose. >> one of the fundamental problems london has is it is a very expensive place to operate.

jobs moving to other places in the u.k. like belfast, scotland, banks have been reducing jobs in london because it is so expensive. francine: tom knows that well. london, fun but expensive. we have a whole host of nterviews. on friday, james bullard of st. louis. this is bloomberg. ♪

tom: good morning, everyone. bloomberg "surveillance" from london and new york. an historic day. the signature of the prime minister on the parchment and on its way to brussels. matt miller is observing what the european union will do and how they respond. matt miller, i understand that europe is not a unified force. who is going to drive the train

within these negotiations? matt: it certainly feels unified from here in brussels but i think the answer is probably that germany will have at least a leading role in driving these negotiations. it is such a powerful and big country as far as trade is concerned and in that case it has a lot to say here in brussels. tom: i want to go to your expert's in automobiles. you're talking about autoimports and manufacturing within the united kingdom. what does b.m.w. want to get out of these negotiations? matt: well, keep in mind what a huge center for auto production england is. a lot of people don't realize how many factors are on the island of great britain. they are very important to what we buy here on the continent of europe and also what we sell to them.

b.m.w. has a lot of customers in england. it is a very popular brand there. they want to get a deal and have tariffs as low as they possibly can be. francine: they say timing is everything in comedy. i don't know if this is comedy the timing when it comes on article 50, that it actually gets triggered? matt: well, this is a deal that has pretty much been shot down already. i don't think today is official release to insides with brexit for any reason. brexit also wasn't mentioned in the reasons the commission gave for shooting down the deal. they said they were concerned about a monopoly and clearing bonds and a monoply and equity derivatives in holland and france and belgium as well. brexit wasn't mentioned, at least officially in the release

that we got from the european commission. francine: matt, in terms of what is going on in brussels today, we have donald speaking later on. are you looking for body language? are we expected to at least find out what the british commissioner can negotiate on with the u.k. whether it is just the divorce or actually trade agreements? matt: well, what we can expect, i just spoke with the vice president of the european commission. he said there is no reason for the e.u. to negotiate both of those things at the same time. it makes more sense to negotiate the divorce first and deal with the trade issues later. he said those kind of trade deals take at least five years let alone speaking about two years to negotiate. toy have no reason to really be incredibly kind or soft on

the negotiations. i just saw video of the e.u. envoy delivering or bringing the letter into the commission building. he took the press entrance. he was as open as he possibly could be rolling up in his jaguar and walking in with the briefcase. that is not going to enbear them at all to the brussels commissioners. tom: thank you so much in bruss unless morning. on our london desk, geoffrey yu of u.b.s.. help me here not with the interest rate differential but with capital flows out of europe. a e us a clinic, dissertation. >> there are two things to look at. is the u.k. going to be ok by changing its finance model as a destination? is that going to be a weak story

on the continent, especially down in the south. if you lose london as the financial center which helps and redirect global flows into europe, i think that is going to be a huge loss for europe as well and i think that actually may incentivize the stance toward negotiations when it comes to the city. tom: matt miller brought up clearly the reality of tariffs. it harkens back to blocism of the 1930's. do you have a risk here of a 1930's structure between the continent and the united kingdom? >> we worry more about the regulatory differences. if there is slash and burn in terms of regulation in the u.k., that gap could actually sort of inhibit the trade in good and services a lot more compared to what tariffs can do.

that plays a much more important role in the trade agenda. let's see how much of a priority that will entail in the negotiations too. francine: geoffrey, how would you play any uncertainty? euro swiss may be a good way of doing it? >> euro-wis swiss now is still seen as a proxy for houng how much the eurozone risk is now. you're seeing the balance sheet expanding, not to their liking. the brexit negotiation, the adjustment will still be on terling. tom: geoffrey, thank you so much, with u.b.s., on this historic moment. special thanks to sebastian mallaby for appearing with us. willem buiter on this historic

moment for the united kingdom and on the global economy and maybe he'll talk about soft data and hard data as well. coming up later, alex salmond. really interested to speak to him. with oil where it is. i'm sorry, the dialogue has changed for scotland. alex salmond on scotland and on his united kingdom. it is an historic day in london. it is not all that gloomy. i love this view. i will never get tired of this view of the thames and st. paul. stay with us for another hour of "surveillance." ♪

>> it has been a 44 year marriage. let the divorced begin. the prime minister places signature to department.

britain will leave the european union. line strawn in the sand as the united kingdom moves to negotiation. market again stabilize. yields higher on the global economy. an update from willem buiter from citigroup. we will always have paris. president trump says "no" to global warming legislation and the obama edit this of climate change. surveillance.erg i am tom keene with francine lacqua in london. and the prime minister of the united kingdom moving from 10 downing street parliament. it is an immense day of symbolism for britain. francine: we just saw the car bringing the prime minister from number 10. it is just a couple hundred feet to the house of parliament. there is a week of remembrance of the terror attack that happened in westminster which was exactly a week ago.

but today is full of symbolism and we understand the prime minister, before going on to onng questions, may brief what was in her letter. we saw her signing yesterday. the envoy to the eu have the letter at the entrance of the building in brussels and he handed it to the president of the eu in about an hour from now. tom: as we heard from sebastian mala be, germany, he thought the one to focus on in this negotiation. right now you need a news update on brexit in britain with first word news. here is taylor riggs. >> the clock starts today on two years of negotiations. in brussels, uk's ambassador will present a letter to the european union president. it invokes article 50 of the lisbon treaty, the legal mechanism for leaving the eu. it will be a tough negotiation

involving money, trade and immigration. president trump will be briefed today on various options for tax reform. people familiar say the president's chief economic advisor, gary cohn, will be among those conducting the briefing. one of those proposals will present a border adjustment tax. the 45%l in -- replace corporate tax with a 25% tax on domestic sales and imported goods. some democrats are willing to risk a nuclear fight over supreme court nominee neil gorsuch. he needs 60 votes to be confirmed. if democrats try to block the confirmation republicans could use the nuclear option to change the rule to a simple majority vote. 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: thanks so much. two days in a row, stability within the markets after the health care friday into monday.

i believe that was 24 hours ago. the vix showing better in the stock market, often carnage of monday morning. taking the 30 year bond, the color is wrong. 0.01, that should be read 3.02. on the 30 year bond, you can spot sterling. francine: the pound touching a one-week low against the dollar and the u.k. preparing to start that process by which it will leave the european union. actuallyl process will start in about an hour and 20 minutes. sterling weakening versus its group of 10 peers but it did pay itself in the decline. is priced in, we spoke to quite a number of .articipants but it is unclear

the markets are a bit pessimistic when it comes to town shortage. let's get back now today's top stories from geopolitical points of view. the u.k. triggering a two-year divorce from the eu. a reporter at westminster joins us now. anna, i know you have been speaking to some of the great lobbyists, but this is happening in two years of negotiations. it will be top talks. message talks is the that we heard from smt, from hillary been of the brexit select committee. there is a lot to get through. the chief in the u.k. said this is unparalleled in its complexity. it lies ahead for the government. it all kicks off today. that letter has gone from the u.k. to brussels.

at 12:20e handed over here in the u.k. to the european side and then we hear from theresa may. we get more details on the tone of the letter. that is what some people have been suggesting could be interesting and illuminating into what lies ahead. tom: help us here with the drama we are going to see today. the green letter of the house of commons. is the prime minister greeted with triumph? or a look back to the tragedy of last wednesday? help me with the greeting she will get. israeliouse of commons a silent place, a very nor is he -- a very noisy affair, competitive. there are going to be some moments to remember and reflect on what happened here just one week ago. that certainly would have been it. but it will very much depend on

which side of the argument you went to. in the house of commons, it was very much pro-remain before the vote. a lot of people had to do a lot of soul-searching and changing of minds in some cases to try to get themselves around to where the country is going now. her party is perhaps still divided on this issue. the country is still divided and brexit is happening. now she signed a letter to start that process. you see that clock starting to time.t around 12:20 u.k. anna edwards back there in westminster. willemnow bringing back buiter, citigroup chief economist. we talking about what negotiations will look like. do you have a clue? or do we just stand back? probabilities,

the negotiations will be long and protracted, but even the divorce negotiations may not be finished in the two-year horizon which means britain would actually crash out. so renegotiating the new trade movementscross-border , corporations, people and all of that, that sort of thing, that will take many years, a decade or more after the divorce is complete. all we know is this is going to be a. of protracted uncertainty for the rest of the eu. francine: when you say it crashes out of the eu, what does the landscaper the u.k. economy look like? markets, wee single think that is fine. but because that means low are hardly any on

manufactured goods. unfortunately, it is administered rules, regulations, legal constraints, rules origins. domestic content, protections masquerading as labor standards, environmental standards and human rights standards. and you could have zero tariffs and still be able to take the thing. tom: you began your academic university of amsterdam and ended up in a small dutch town in connecticut called new haven at yale university. he studied equilibrium. help me with the new british equilibrium. this is a huge deal. i have seen it in article after article. of social economic mix stability for nation.

do you believe in equilibrium for the united kingdom? >> there are many kinds of equilibria. u.k. willve that the go through a long and protracted period of uncertainty. they will renew trade with certain people, and border relations are worked out. this will take a decade or more. the potentiale, outward growth of the u.k. will be impacted because of low investment. labore elastic supply of could have benefited greatly. and i think the short-term the dawning of the

realization that this is going to be top, will fall. down on top of this lower potential outgrowth. tom: do you assume a dampened gdp growth in europe and in the united kingdom under these negotiations? not so much in recession call, but just a wait to gdp growth because of the tension of the negotiation, whether it is travel, migration, passports or if you talked to matt miller earlier, automobile dynamics. >> i think it will be material to slow down this cyclical slowdown in the u.k. it will be minor because the u.k. relative to the eu 27 is a small stage. the impact on the eu 27 will be be much less will

significant economically than the slowdown in gdp. not the same order of magnitude. francine: we will talk more about that. thank you so much. will speak with alex salmond, spokesperson of scotland. about remaining together. this is bloomberg. ♪

tom: bloomberg surveillance in new york and in london. now we need to go near parliament on this historic day. abington green in a conversation with alex salmond.

he has a strong sense of independence for his scotland and a dynamic source for his morning needs a reassessment by all of scotland. what me cut right to it. what should miss sturgeon do? what should she do to benefit scotland? starting with the first minister of scotland, she should stick to her mandate from the manifesto of last year, and pursue an independent course for scotland in the european context. scotland as a european nation. supposedly there is a history behind that. if you keep the european connections that is a strong position to appeal to the scottish people on. mathematics on the that have changed for scotland. oil is not $100 a barrel. i showed you the chart of north sea production and it is not so good. can scotland go it alone? sell me on the economy of scotland right now.

>> there is much more to scotland than oil. i just noted there is a billion barrel field announced this week. there is a lot of life left in the north sea. it is still a big asset to have. we would cut to the chase, as you would say. , at number 15 on the planet, over 200. the 15th most prosperous country on the planet can survive and prosper as long as it keeps its international trade connections. we want that european single market. akita prosperity is the ingenuity and talent of the scottish people and our productivity. we should retain. if we can do it in the u.k. we should do it independently. tom: let's go back to 1703 or 1707. what are the ramifications to england if scotland walks away?

if scotland maintains its position within the single marketplace, through the european union membership or for that matter through the single marketplace, then that would put scotland in a strong competitive position these of the a country outside of that marketplace. but you are right with your history. today in london, they should be thinking of the 1739. that is when robert walpole was staring down on theresa may as she signed our article 50 level. when britain declared war in europe, he said "today they are ringing the bells, tomorrow they will be wringing their hands." francine: all right. away from 1707 or 1708, onto 2018.

talking about the timeline of when this should be, would you not give enough time for theresa may to actually come back? are we not putting too much may when sheheresa hasn't even started negotiations ? >> the timeline for this is now pretty clear. 18 months to two years time, she will have a deal or no deal. everyarliament behind me, other parliament across the european union, will have to decide and vote on that deal. that is the right moment for on thed to decide british brexit deal or have a new future as an independent country. i then, nicola sturgeon will have a genuine choice on the timescale. the people of scotland, that is simply on acceptable. francine: let me bring in willem

buiter of city. there is a kind of lukewarm agreement. it is not what we have now. do you believe that scotland would vote to stay in or stay out? >> i am not a political pundit and on scotland. market isthe british significantly more important to scotland that access to the eu 27. it would be wonderful if they could keep both. but it really depends on just how bad or good the deal is being negotiated. the factwto then remains that trade with the u.k. is more important then the eu 27. it certainly would be tempting for scotland to take a long europe and try to strike a deal.

both look at the eu as an independent nation. it really depends on how good our deal is. tom: i want to go back to your history, francine. salmond, help me doeswith the -- what chancellor merkel have to do in francine's 2017 to avoid the hand wringing of 1739? >> it is a good time for debate with an error that man. that's with an erudite man. unfortunately, some of the stuff s,u hear from the brexiteer the people who walked out of the commons committee yesterday, it is based on that reality which is why the wise words of robert walpole should be ringing around

this place. with europe's comments, scotland of course can have access both to the single market and to continuous trade with the u.k. market. davis told ireland's just a few months ago it is not about the truce between the u.k. and europe. scotland shouldn't have to make that choice either. remember, after america, scotland is england's second-biggest export market. so theresa may goes across the atlantic to hold hands with donald trump to secure that market, maybe she should go up to scotland and be nice to nicola sturgeon. francine: we do need to break down some of the exports. thank you so much. we are back with willem buiter of city. tomorrow, bloomberg television will be speaking to the italian finance minister about the future of italy, telling banks about the future of the european union. trying to get bankers to move away from london.

look for that interview at 5:00 a.m. in london and 12:00 p.m. in hong kong. this is bloomberg. ♪

tom: on this historic day in london, francine lacqua with willem buiter. i am tom keene in new york. there is so much to talk to about in this moment. why don't you go to the majesty of what we are seeing in london? francine: what i am focused on is the perception. wrongly, there is

still a kind of divide between people who think the u.k. economically will do better because they voted for brexit and the divide amongst people who wanted to remain. that it is the end of the world for the u.k. >> it is neither. it is not the end of the world from the economic perspective. it simply will be a cyclical blow for the u.k. and for ever after, a slightly weaker path. in some way it is the end of the world politically for europe. is ase the european union global player and britain on its is a member of the league of insignificant nations. political.mage is the economic damage you can live with. francine: quickly, we do have a viewer asking how do you define

being independent? >> they do have free movement. with the european union. they tried to stop that and they had to resend that due to the referendum in a hurry. they also have the 60 years, negotiating hundreds of treaties with the aspect of trade with the european union that don't quite have free market access or passports. but they have had 60 years to sort this out and they have free movement. francine: thank you so much. willem buiter, chief economist at city -- this is bloomberg. ♪

tom: the letter is on its way from london to brussels. no one in new york cares. all we care about is this really getting for us on central park?

we are getting to see a little bit of green. it is a beautiful early spring morning. in new york city, we welcome you. francine lacqua in london. let's get to a busy day with taylor riggs. >> starting with brexit in europe. it will redefine the uk's relationship with its largest trading partner. prime minister theresa may makes it official today. she is formally starting the process of leaving the union. she will hand a letter to eu president in brussels. battley begin a legal over trade, money and immigration. the u.k. government will not be entering negotiations on the scottish government's conference for a second referendum. scottish lawmakers gave their approval for another vote by spring of 2019. that could be a showdown within the u.k. in the midst of brexit talks.

the u.s. presidents choice to lower drug costs by approving faster. the former fda deputy commissioner, according to persons familiar with his thinking, he wants to make streamlining approvals is top priority. in south america the worst may be over in brazil's meatpacking scandal. the largest destination for brazilian beef, hong kong, is the latest on the list of restrictions. foreign markets temporarily stopped imports after reports that government factors were bribed to allow tainted meat to be imported. 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: we are going to migrate away to what is going on in washington. you are probably exhausted about all the different articles about policy and policy prescription and what we are going to do. here is the only chart that matters. we are going to educate kevin

cirilli right now on debt to gdp. down in the lower corner is reagan's america. this is the debt to gdp 30%. here iswe go to bush, the clinton rollover of improving debt to gdp and here we have bush junior and then we go to president obama and the debt explosion up to president trump. the backdrop for all that you are covering in washington, it is not ronald reagan. he has a higher depth of gdp to work with. >> of course, when he looks to negotiate with house freedom caucus members who are incredibly concerned about the rising national debt, this is going to be something that we take a look at. week, on thursday of this gary cohn will lead a meeting with the national economic council with president trump and they will discuss the various tax proposals. tom: where do we stand on the republican group -- not the

establishment like mr. cohen, a democrat or the president, not sure what he is to be honest -- with the idea of debt expansion in any cost? are we going to be revenue troll -- revenue neutral now? six months or five years from now? >> when you look at the trump administration there are several folks in the administration who would consider themselves to be conservatives in every sense of the word. however, they are also nationalists and that interesting tug-of-war between conservatives in the tea party as well as the rising of the nationalistic movement led by the likes of steve bannon is going to really paint the backdrop as they move forward because those folks who were nationalistic in their political ideologies care less about national debt than they would someone like mark meadows or -- as all of this is going, look for that interesting tug-of-war

tom:. you brought up the inside within the news, and i don't know what it is. what is an and tax reform? do we know? >> we don't and we don't know where this administration stands on tax reform and whether or not they want to support something like the border tax. but i have to be honest. the lawmakers i spoke with yesterday on tackle -- on capitol hill, they feel a bit emboldened because they see paul ryan as potentially weakened in the sense that he is a supporter of the border tax and many of them are not. francine: what is the one thing that would help with sentiment in the u.s. when it comes to tax reform? do we know what president trump can do to hit the right mark? foremost, the white house want to negotiate with democrats, but i am not sure how that exactly would work, especially if the reports are

true that they want to bump a branch of tax reform with the infrastructure plan, that will be there bargaining chip. every democrat virtually is panning all of the tax policy. the second point is they need policy to win. last week, it clearly took the wind out of their sales with the devastating health care lost because they had a republican-controlled congress and white house. it showed a lack of coordination between the white house and the operation led by speaker ryan. francine: did they talk about brexit and article 50? struck me that comes new york does not care about it, and he is probably right. does the trump administration care about brexit? do they see it as a break in their process of getting elected? >> they see parallels between the election of president trump as well as with brexit. that is a theme he has drawn on frequently and featured back on the campaign trail.

even to some extent during the transition. that, beyond those themes, i can tell you that mike pence was on capitol hill meeting with members of republican leadership, again crafting policy with article 50 not so much on their radar. tom: thank you so much. kevin cirilli this morning. with a daily update, maybe not as fiery as some of the others. it is almost exhausting, the number of stories to read to keep up with going on in washington. oflem buiter, your study political economics, when it gets heated up in the political debate, what does that do to economic growth of a nation? tom, say it again? tom: i was going to ask, if you look at the political economics of any given nation, when you , whatn uproar in policy

does that do to a nation's economic growth? policyhe whole, uncertainty, especially policies that affect economic behaviors, it is a negative. but at the same time, a lot of in politics isss just entertainment, right? awful --nce, the cuff the cuff awful about obamacare, it simply matters because it may have implications for what the trump administration is able to deliver. if there is uncertainty it is a negative. it is a most never the case that any uncertainty is positive for economics. francine: thank you so much, will about her. stay with us. -- thank you so much willem buiter.

it will be asking for thoughts about brexit. he just broke a great opinion piece. and also, how theresa may should negotiate to get the best deal possible with the eu. this is bloomberg. ♪

>> this is bloomberg surveillance. i am taylor riggs with the bloomberg business flash. european union regulators have lots -- lost it takeover of the stock exchange in london. it would have created europe's

biggest exchange but regulators said it would of harmed competition by creating a monopoly for clearing bonds and repurchase agreements. -- world's largest mass at asset manager is shaking up its stock units. black rock is cutting jobs, reorganizing funds and delivering fees. they are moving cheaper exchange traded funds with black rocks etf business while hurting its active managers. a bankruptcy judge in california has ordered bank of america to pay $45 million in a fork or case. that theyfound proceeded with a sale of a family's home after the owner had sought bankruptcy protection. they say the bank terrorized one of their children. inc. of america isn't commenting. that is your bloomberg business flash. now, this is where we need to talk about article 50. this is the day that article 50 gets triggered.

what does that mean when it starts three years of negotiation? what that means is we are looking for a tone in the letter theresa may will formally give to the eu and the commission to see whether things are going to be very difficult during her negotiations or indeed, slightly better in terms of concessions and allowances. , as get to alexander stubb former finland prime minister. b, great to see you. we also have willem buiter here of citigroup. it is divorced day. you have a lot of progress of people in the u.k. who say let's not call it divorced but it always takes two to tango. to say whatficult the eu could have done better but this is certainly a historic day. i won't argue that it is right up there with 1952 when the coal and steel community was founded or 1989 when the cold war ended.

this is a sad day in many ways. the first time apart from greenland that a major european country leaves the european union. we are basically walking into the unknown. it is going to be difficult. francine: and you are right. it will force europe to look at its future. many countries have used the u.k. as a smokescreen and will use their best excuse for less pooling sovereignty yet. i actually think there is not much appetite now moving towards the union. to you think there is now a bigger chance of the union becoming unraveled? >> definitely not. i actually think that post-brexit and donald trump, we have strengthened the popularity of the european union. my argument would be in very simple terms that the eu should right now sees this crisis, this opportunity, and do some reform. my argument would be that we need to do five things, continue enlargement because that is the

had,policy the eu has defend our values because very few people are defending democracy and freedom now, and we need to promote the four freedoms which means the freedom of goods, services, money and people. we need to focus on security. and we need to reflect on the future of europe. we should use this crisis and opportunity to look ourselves in the mirror and think what we can do better. tom: but the template has changed. we see it with the french election. i love your essay and how you hearken back to the coal community in 1952 and 1989. i need to gather 2019 and the overarching template here is the change in immigration and migration. how does europe deal with brexit as well as dealing with the heated debate over immigration? >> as it always does, through three phases.

number one is crisis, number two is chaos and number three is the solution. that is what european integration is all about. i think that the asylum and immigration process is probably the biggest one. wellhas sustained fairly in 2015 and 2016. other crises have been looming like the euro crisis in greece. but that is what they are about, a crisis management organization trying to find common solutions to common problems. that is what globalization is about. tom: what do you need from germany? >> we need leadership. i would argue that angela merkel , after barack obama, is now the leader of the free world. they have, obviously, economic clout and they have clinical and political leadership. that is what we need from germany now. i also think we are going to need a strong franco german axis. that will depend on who is

elected as president of france but say hypothetically that it will be emmanuel macron on. this would for the way forward. francine: thank you so much for your time. the former prime minister of finland there. willem buiter when you look at iss franco german axis, this the one thing missing in the last five or six years. was europe significantly weakened? >> absolutely. beene has not even reactive to these problems. it has waited for them to go away. it is very important that whoever the next president of france is, work closely together with germany, to get some sense of direction to the europeans. the only candidate i think that actually might do that is macron. the independent fillon is much reestablishto

working franco german axis. tom: help me with the definition of socialism? i know it has changed. we just had the former prime minister of finland on and he goes back to 1952. socialism back then was a little bit different than socialism now. what is the socialism on the left within these negotiations on brexit and the eu? europe isdemocracy in mainstream politics. they would be left wing liberals. support for the welfare state, support for redistributive taxation in general, and the belief that the government has a significant role to play in the education.health and

so socialism in its origin is each according to his needs. staterst european welfare is very supportive of the developments that will challenge this over the next 20 years. >> we will come back with and primebuiter, minister may is moving to parliament to make appropriate comments. for those of you in the bloomberg terminal, this is the way you watch your desk on global wall street. you've got the setup the four the bloomberg screen. you watch francine lacqua. .his is an example you get any number of the blocks we do, and down to the bottom, you can ask the question.

.t at tv ♪

tom: it is a sterling day to do a report. 1:24, june 23. where was sterling? 141-142. the depreciation has been tangible in the united kingdom economy. there is euro sterling. francine has that tattooed to her brain. 86 pence. how about a single best chart right now with willem buiter of citigroup? he didn't do this when he was at yale. help me here with soft data or hard data. what we've got by representation is the federal reserve bank of new york guesstimate of gdp a whopping often --

3%. southern conservatives are down at 1% with a hard data analysis, looking into actual economic numbers. i believe, professor, you never lectured on this. the you care about soft data? >> there are no hard data. there are soft data, very soft data, but even the so-called hard data like gdp basically surveys its qualities as government resources spent on statistical services have been cut back. i would not take the distinction too seriously. that different time series soft or hard, show different roads rates is interesting. my guess is they are both wrong. tom: the divergence has never been greater between the some data and the more cautious view of the first quarter of actual statistics.

what is your citigroup team saying? arethey in the 1% camp or the optimists up at 3% gdp? closer to say i am the 1% than the 3% simply because optimism, itself, is just the mood. there is no automatic translation of optimism and animal spirits into capital expenditure. and unless that happens, optimists lose the good feeling. which does not add to employment. how do you turn optimism into actual spending? >> first of all, it has to be adjured. markets and businessmen, people in charge of capital expenditure , are human beings who often go

through mood swings. thatne has to really see this is a persistent mood based on beliefs that are reasonable. and i think the kind of police people had at the beginning of wasyear that mr. trump talking about, getting the corporate tax rate down to 20%, having massive infrastructure spending and across-the-board tax reform in general -- all of that was simply not reasonable. tom: thank you so much. particularly your commitment to the show. we will continue on this important economic and political discussion on surveillance radio. professor buiter of citigroup. he will be watching the fed president speaking. what a week it has been for bloomberg. michael mckee in madrid.

on the day calendar for friday, james bowman of st. louis with a hisly timely speech on series. look for that on friday. we thank all of our london team, particularly and edwards for their coverage this morning. prime minister may will speak in the house of commons on this historic day for the united kingdom. looking at the data this morning, pound sterling weaker, 1.2423. stay with us across all of our platforms. this is bloomberg. ♪

>> pulling the brexit trigger. prime minister may signs article ties begin to unravel. over an exit bill, banking and immigration two years in negotiation between 27 eu nations and the u.k. lie ahead. the brexit their case has not materialized. with economy has not rolled over. is the consensus call quickly becoming by europe. good morning from new york city. a warm welcome. i am jonathan ferro alongside david westin and alix steel with a focus on brussels. brexit process begins. futures here in the united states ahead of the open a couple of hours away. futures treading water, equities go nowhere. cable rates a little bit weaker at 1.2422 -- >> the by is picking up. you have a yield coming down by three basis points. the vix