francine: stimulus before christmas? mitch mcconnell says lawmakers are getting closer to a deal, guidance from the fed on bond buying. expanding restrictions. new york city mayor says prepare for a shutdown after the holidays. france and poachers eight -- imposes a curfew. bang dividends, imposes strict limits of payoff levels. we hear from the chair of the supervisory board. good morning, everyone.

welcome to "bloomberg surveillance." i am francine lacqua here in london. we are just getting some figures, so let's have a look at what that means. i think the ifo institute numbers do not take into account the latest lockdown, so it will be a good indication of before lockdown but not what we will see in the next few weeks. before we get onto ifo, we have central bank pmi, and there is positive news on the stimulus. of course, watch out for anything in terms of assets, bond buying program, that areges on the fed, and we hearing positive noise out of brexit. i think we have the ifo institute figures. i don't know if we can get them to you, if we can get them on screen, then i will bring them to you, but, again, a good indication of what we have seen since lockdown. now let's get to the bloomberg first word news here is leigh-ann gerrans. hi, leigh-ann. leigh-ann: good morning,

francine. president-elect joe biden is a sibling a team to drive forward his ambitious climate agenda. he picked former michigan governor jennifer gray as environmental saturday, and gina mccarthy as his climate staff. germany isope, closing non-essential stores and urging offices to shut. new leap offaces a covid-19 infections last month. the country's lockdown will end in early january. the u.k. is going ahead with plans to ease coronavirus restrictions over christmas. that is to stop mounting pressure to keep people from mixing indoors. stronger guidance on how to keep elderly relatives safe. reports may include asking people to self-isolate before joining other households.

and australia plans to challenge china. the wto, over the decision to impose tariffs on over 80% of sign ofrts, a further deteriorating relations between the two trading partners. now, it could take years to resolve. global news, 24 hours a day, on air and at bloomberg @quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am leigh-ann gerrans. this is bloomberg. francine? francine: leigh-ann, thank you so much. now let's kick it off with the u.s. republican congressional leaders, and they are optimistic about reaching a deal and i stimulus package. senate majority leader mitch mcconnell says, quote, "we are getting close, closer, and closer." they spoke with house speaker nancy pelosi and senate democratic leader chuck schumer. no word of- democrats have agreed to set aside two of the most contentious issues. morning as the

chief economist at all ianz. is it too small to spark the economy? ludovic: companies are on the verge of a liquidity crisis. we just need to get money out. the second reason is it would be just a great start for the biden administration to try to get bipartisan traction, something as important as the stimulus. the third reason is i think it is just, you know, something that could anchor a little bit more this idea that 2021 will be a lot about what policymakers could do, so for me, this stimulus is very symbolic as well as easing the micro of the economy of the united states today. francine: ludovic, when you look

at exactly what it moves, what does the u.s. economy need right now? is it support for companies longer-term? is it furlough? are you worried about the amount of solvency in the system come 2021? ludovic: look, one out of four companies in the u.s. in 2021 will have some sort of distress, so capital financing needs to be restructured. on the corporate side, it is also about making sure the investment cycles restart. if we just wait for the second half of 2021, the investment cycle in the u.s., it is far too late. of u.s., it is 40%, 50% social expenditures. what we see, transportation, creation of hospitality, all of these sectors, so we need to have those companies in particular, and this is why it is important.

on the other side, of course, this is major. there is no such scheme in the u.s. today. and today, the issue is that unemployment figures in the u.s. are far, you know, underestimated, because there are so many people not looking for a job in that sector. look at restaurants and hotels, or anything related to, you know, big cities, workers that are going to big cities just for the day, for a day job and stuff, so we need to find something that is also bridging the income gap. so is that putting something in place that is smart, which is what this bill is trying to put in place -- not put in place, but actually putting money into it. for me, it is important that we get this right, because the risk of the u.s. economy being broken in the first quarter, as the vaccine is being rolled out, is very strong today, and we cannot afford that. especially as you saw they need to make sure they have a bit of momentum and growth to be able

to pass some of the reform that is announced, and they certainly want to ensure that they put out of the door by the first couple of, you know, quarters in the united states. francine: ludovic, what would be the first three challenges with janet yellen? ludovic: well, i think the good news is she does not have to worry about people trusting the credibility of the u.s. treasury, despite the numbers being crazy. the gdp in the u.s. is going through the roof. she needs to find ways to distribute that cash, so execution, execution, execution. we have seen that over the past couple of months, you know, with the german recession not being able to get this out. the second is to find a way to bridge the liquidity gap for these companies, whatever can be done on making sure that some sectors, particularly supported, and not just, you know, some more targeting. and the third thing is to put a lot of money onto the unemployment benefit type of scheme to make sure that workers are supported, checking the jobs

for massive unemployment, and that will also increase in the u.s. first quarter of 2021. francine: is there no chance we get sustained inflation 2021? ludovic: i am not concerned about inflation. for example, chinese suppliers asking for increasing prices by 2040, essentially because they are the only game in town. we do not expect that for any reason, and i am not concerned about monetary inflation. look at the lack of liquidity, i am not very concerned. it could be, you know, full inflation, bottlenecks, you know, but not something that could mean that the fed will go back on its average inflation. i think this is something we can handle, at least until 2023, without being worried too much. thank youall right, so much, ludovic subran of al

ions -- allianz stays with us. we will bring you more details, next. this is bloomberg. ♪ berg. ♪ when you switch to xfinity mobile, you're choosing to get connected to the most reliable network nationwide, now with 5g included. discover how to save up to $400 a year with shared data starting at $15 a month, or get the lowest price for one line of unlimited. come into your local xfinity store to make the most of your mobile experience. you can shop the latest phones, bring your own device, or trade in for extra savings. stop in or book an appointment to shop safely with peace of mind at your local xfinity store.

francine: economics, finance, politics. this is "bloomberg surveillance." i am francine lacqua here in london. now, the ecb has lifted its band strict limits on pale lenders. below 15 percent of accumulated profits for 2019 and 2020, and the ecb supervisory board chairman told bloomberg it is an important opening. vestager: this is important,

but we are enabling banks to a pay within a certain threshold, within a supposedly rail, and these will change with respect to where we have been after importantit is an opening, which has been broadly supporting the supervisory board and which recognized that we are slowly back to normal. although we are not hitting normality. >> broadly supported, suggesting not everybody supported it. andrea: no, but broadly supported. dividend allowance that you would allow on a case-by-case basis, a bit stricter than what was announced in the u.k., stricter than what we are seeing in the u.s. is that going to be a problem in the banking sector, as far as competing for investments, staff, and so on? andrea: i do not think so. the important thing is the opening to receive payment, and

we also gave forward guidance, basically, we intend to repeal the recommendations in september, when it comes to an end, so we are going back to the ordinary participation in which supervisors will address the dividends by banks, banks specifically. also argue that bank shareholders should not yet,y be seeing anything as long as the banks themselves are getting the benefits of regulatory relief, the benefit from the ecb, there is the argument out there. why have you decided to go ahead, and bank shareholders get something? andrea: there has been a discussion in the last month in my board. on the one hand, we recognize there has been a reduction in the uncertainty. now the macroeconomic path is clearer. our economies are being more byilient, and it seems that,

2022, we will be back to precrisis level. that is good news, and that is what is pushing out the payment. on the other hand, we still have not a lot of visibility on the asset quality, trajectory going forward, create risk, and also, as you correctly say, there is a lot of support coming from central banks, the supervisors, and the fiscal policies, which is supporting also been profits. and these are behind the recommendation to remain prudent for some time. >> what about bonuses? what is your stance there? andrea: we are also prolonging our general recommendation to remain moderate in the payment of bonuses. and also, we are giving forward guidance that, by september, we plan to go back to the old normal. >> the banks would say, look, they need to pay their staff.

they have had a good year in trading -- for various reasons -- and if they cannot pay the theirs, they risk losing best after non-euro area banks. does that concern you? andrea: we have never asked banks to not pay bonuses, just consider paying them to ofbe more postponements these payments, to be moderate given the conditions. was andreaell, that ria, chairman of the ecb supervisory board. chancellor merkel says germany is facing a peak of new infections next month, and the country's lockdown will end in early january, as planned. is ludovic subran with allianz. a possible third wave of

infections and what these lockdowns are doing in europe, are you less bullish on europe than the u.s. right now? ludovic: because of the uncoordinated stop and go policies, you know, what you see now is not only, you know, the second wave or the third wave, it is that countries are doing something which is very costly for europe, for, you know, ng in someskii countries are forbidden. weconcern is at the moment, are very worried on brexit at side, europe went big and bold and the announcement, now it is all about spending the money. we are still missing some plans from italy and spain when it comes to what they want to spend the money on. so that is the only reason we are less bullish on europe, but it takes 27 times longer to agree on something than the u.s. francine: when you look at the

recovery fund, is it a real game changer for europe? what more do you need? i may ask you about brexit, but what more do you need to see in the next 5, 6 months to make sure that europe is actually on a strong footing? ludovic: well, as i said, we need to make sure that some of the countries that have not labeled the way they are going to use the funds to reach that, so we do not have the issue of disbursement. it is a major breakthrough, you know, i am very happy about this recovery fund, but we still need a plan in some countries, because the real list is lowballing this recovery, especially when you look at how much the u.s. is going for. they are going very strong for the stimulus, and we need european countries to do that with the help of this money on their own balance sheet. so we need a plan, and we also need to make sure that we continue to talk, because the real risk and policy mistakes is having this, you know, de- synchronized way or having yet another border, you know, closure from another country. and, as you know, trade is of

the essence here. trade is rebounding very fast, getting the most from the rebound with china. so europe, actually we need to make sure that the competitive edge is there, and to do that, we need to have as much liquidity as we can in the european single market, and of course the job market is also very important, you know, and the partial furlough measures and without creating a major surge of unemployment and therefore risk is very important. this is very local, but to an extent, it is also something that will have to be decided, you know, in brussels, and frankford, in part. so i vaccine, furlough, trade reopening and avoiding that everybody does their own just because they're dynamic is very different from one country to another. is thee: ludovic, what past mistake from the ecb looking like right now? is it too much or too little? ludovic: [laughs] you know, the ecb has been, for describes 2020, because

they have been really strong on making sure we keep the euro. just remember where we were 10 years back and how we were finger-pointing everybody. today, we are not finger-pointing, by 2021 is another game to play. i think the ecb has done the right thing by extending the envelopes. i think they have a big issue on their plate, which is the pact with the banking sector, and, saidnow, i think enria had something, "we cannot play god forever," so the transition with monetary policy and the banking sector, where we announce on that front will be pivotal for 2021. so i would hope the attention here, i am not concerned about their, you know, being able to suppress any market volatility. i am not that concerned about the euro-dollar anymore. i am not concerned about inflation for sure. we avoid deflationary pressures by doing more. i am really concerned about the

banking sector, because we see abundant liquidity being injected. you have a record low for the eurozone area. so we are not in an. extension of credit space of course the demand is very low. this is a very big issue, and it is critical to the banking sector, its weaknesses, and what we see between the supervisor, regulator, and the banking system. francine: ludovic, there was something that actually caught my attention, the group of 30 putting this report out, led by that draghi, rajan saying they worry about solvency, this is the next big crisis in the making. is there a way of stopping the solvency crisis from taking hold now? ludovic: what is sure is we know this is the big risk, right? so compared to 2008, you know, we want to make sure there will not be massive externalities from the crisis.

they are on hold everywhere to you have states like zombie banks, companies, some sectors that actually have no future. some of them have done great, but of course the liquidity crisis, especially in the corporate sector, could become a sovereignty crisis. to actually increase, over the period of the pandemic, so from 2022, you know, over 20 19, by 20%. that they are going to catch up at one point. we had, for example, and france, increasing sovereignty by 2021 by 30%, and germany by 15%. this may be needed to increase and get this cash out somewhere else, this capital somewhere else, but this is something that is, of course, very costly in the short-term. this could create a massive, you know, domino effect, and we are particularly worried about some

of these large companies, hospitality, retail, but our particular risks because they invested.ready over if they do not have nominal growth in 2021, if a lot suppliers, employers, you know, shareholders, this is a big issue. and i think this is why the attention of policymakers is on this, but we will see if it is as efficient as they promised. president macron and others have said there will be no bankruptcy plan. that is a very strong promise to make. subran, annaovic father, chief economist at allianz, not letting you sleep too much. we will talk about global competitiveness and also touch on sovereignty. this is bloomberg. ♪ oomberg. ♪

francine: this is "bloomberg surveillance." i am francine lacqua here in london. the markets are seeing a bit of a positive. better, weittle bit heard some positive things about stimulus in the u.s. coming up, our briefly show, etf iq europe, we will talk to strategists about cash levels and of course ets. this is bloomberg. ♪

francine: welcome to bloomberg etf iq europe. i'm francine lacqua. over the next 30 minutes i will

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