so we're looking at a 1% rally potentially according to futures on this market already. already brief stages of the opening rotation. you can see we have four to five stocks up for every one down. that's going to be a bit more conclusive by the time we get to full rotation open. this banking sector first and foremost today, clearly there are those out there who believe that it is now going to be a green light for a big rally on the banking sector. that may well be the case. i'm not going to disagree. the banking sector over the last

12 months has done absolutely nothing. within that there, have been some enormous movers and discounting to the news flow and the expectations of capital raising. so i would be guarded if i was you jumping in on some of the banks and sectors. we'll put up the sectors while i'm talking as well to have a look at where the banking sector is currently trading. let me just say, all you really care about is the banks. we have lloyd's under pressure. it was a pass but a narrow pass. a whole host of banks from southern europe leading the way there in france. a little bit of relief there. stephan is proud to come over here just to tell us that the french passed with flying colors. good luck to them. bankia is up 1.9%.

the point is we have seen a big rally in a lot of the banks. just some numbers, the spanish banks, for instance, are up 29%. have you seen the evaluation of the spanish banks compared with their peers in europe? in many cases, they are above 15 to 16 times. you have book values way way above one as well. the counting of a full recovery would suggest when the main european banking sector trades, your book values for one seem to be a measure. you have the likes of deutsche and lloyd's trading below those levels. the divergence is enormous. for instance, pnps the year before this is down 9%. credit, meanwhile, is seeing a 20% disparity in performance as well. those disparities continue up

32%. bnp and all kinds of issues are seeing this not being in the stress test tonight down 7%. so bnp, you have a 39% disparity in performance. the same thing for commerce bank and deutsche as well with disparity performance right near 50%. the other one is down significantly more than 20%. be excited for somebody to pass this, but be careful about evaluations now that a lot is potentially built in. stephan, what are we looking at? >> let's have a closer look at the italian banks. as you know, nine banks of the country failed to test. five of them are already taking the necessary steps to close the gap. two banks actually closed problems.

the market reaction quite positive for the rest of the sector. unique trading is higher on this cop s consolidation in the banking sector. i remember speaking to raff bank saying this is right on consolidation, but we have in the seen that much. are we going to get that now? >> the point earlier is that transparency is going to help the trading of bank stocks and boosts. overall, the banks are going to be smaller and more flexible. i think maybe in the banking spectrum we move back a little bit to when you and i grew up, more niche banks and less supermarkets. on the other hand, if the result shows anything, the country that has multi-national exposure does the best. if you want to be a domestic

bank, you need to have more niche play. if you want to be a big bank -- >> that was the conversation from earlier as well, from barclays and usb, the mantra is -- they have performed a lot better throughout the crisis with less volatility. we'll look at the individuals moving up and down many t session. so this is the banking sector today. this is looking at the biggest movers. i can tell you on a 12-month basis, we are down 31% today with an 8.4 rally as far as trading is concerned. do you remember coming into this? a lot of concern about the us a industrian banks and their focus on central and eastern europe. a lot of relief coming into the session. i can tell you that the

portugese bank was the best performer this year. before today's move, it was up 55%. when you think of all the crisis we have gotten, when you talk about the bash and everything going on there, to see the portuguese bank at the top this year. it's the longer term. look back further than the year. >> take it five year or ten years. exposure in africa still plays a role after this. so i think it's survival that is always the number one priority, but in terms of consolidation, more needs to be done. in terms of getting the leverage down, the conclusion is that it's not going to actually help the consumer demand. the velocity map is going to remain low in europe. we are minus 6% in private credit. minus 4% in financial credit. this is not going to start it off. what will start it off is to get some real reforms and the ability to activate the sector

relatively to this program near 20% economy to reach the bank. >> thank you, stephan. three cypriot banks are back in focus after the billion denounce. officials say the tests have shown an improvement in the fortunes of the nation's lenders overall. on the phone with us now, harris georgiades, good morning, thank you for being with us. can i hear your reaction on the comments of this test? do you still think it's a positive message? >> well, it's more than positive, it's an excellent message because this is on the basis of the 2013 numbers. but top basis of the 2014

numbers tape developments feature, we have a successful outcome. and that's an excellent piece of news for the banking system which was looking at the crisis from 2011/2013. now our banks will be under the ecb fully capitalized. they were able to raise significant competence from the last few months from the international markets. and that has meant that we will fully capitalize on the message regarding the confidence of the stabilization and the prospects of the economy as a whole. >> was it credible in size, do you think the stress tests or the worst case scenario was tough enough? >> well, actually, in the case

of cyprus, i think it was much more adverse than any reasonable thing that the analysts expect because we have already been through real stress. so we have had real stress situation and now our banks are technically equipped to cope with yet another thereotical stress. it has been a stressful year for cyprus, but fortunately the moves of the last few months were more than enough to see our banking system after a period of

turbulence and instability which climaxed during the banking crisis of 2013. so we are very optimistic. it was an excellent weekend for cyprus because we also had two writing upgrades last friday. so in short i can say that the cyprus economy is making return and the banking system, which is a cultured part of the economy, is at the same time stabilizing and now they will look ahead. >> what do you expect from the european central bank? do you think that's quantitative easing? >> well, i think that the central bank and that goes for the european central bank, should fully and effectively fulfill its role.

and quantitative easing could be a part of this role. when circumstances require soul and especially in the meantime our economies have gone through a very demanding program of fiscal consolidation, i am rank ing the structural reform and the peaceful consolidation to establish confidence and growth prospec prospects, but the european central bank should come in, yes, definitely at this stage to keep the next boost to the growth prospects. >> what about the last friday when the eu dropped for europe, how do you see that with italy

being non-compliant. what would be a compromise when you guys meet in politics? >> well, let me say that from our side we are under a very strict program. and one which is, in fact, working because we are doing away with the deficit as of this year. and we are eliminating the overall deficit, the excessive deficit also as of this year. so if we can do it, i think everybody should remain toward the common rule book, which is necessary to establish confidence and stability at the european level. >> just one more, we have seen entrenchment seen as outside and too open to influence from outside players including russia as well. the economy has declined for

several successive years, a 5.4% last year. 3% expected this year. you debt is still 102% gdp expected, i believe. you still have immense problems in the separate economy, especially when we're at a time when many are asking for deficit reduction help and yet you're in a tight program. >> well, what you say is true, but everything is improving. all the indicators are improving. we are doing away with excessive deficit. that old debt is sustained and on a downward trend. on employment, it has begun to decline for the first time during the last five years. and we are seeing the last of the long recession, which as you correctly point out has been around. our reform and consolidation program is in fact working and

starting to deliver with the fully complete of the job. and the last and recent developments regarding the banking sector are also very crucial in this direction because no economic recovery can be achieved without a stable and well functioning and well regulated banking sector, which in our case is much more improved smaller, leaner but better operated and better supervised than in the past. so i think we are on the right target. and i am optimistic about the prospects of the secret economy as a whole. >> i really appreciate you joining us today, sir. thank you very much for your deed. harris georgiano from cyprus. i spoked to the finance minister over in italy as well, and it's been singled out, hasn't it, obviously the bank of

italy is crying wolf on this one. they think it's been pretty tough. others are raising the questions, but look at bnps which before today's session was down 9% year to date. t bnps is now down. don't forget, a lot of the issues that have been presented with the 25 banks that i have the names of here in front of me, a lot of them have already taken action via capital raising and asset sales to eliminate the questions raised by the stress tests, indeed the aqr. we can see elsewhere bank of populari, relief there at 5.3%. cnbc also spoke to the ceo of unique credit for his reaction on the stress tests. >> this will allow banks to cops trait on the lending.

probably we could see some consolidation looking forward. >> so where is the problem for the french banks? there aren't any, apparently. look at this, they are all higher. it is not euphoric today. it's a decent rally but we are not going too far. just to tell you, i think the market has done a good job at differentiating between the individual banking stories and not just toting it as one sector. look at this, look at the fine litigation issues over at bnp paribas down 7% over the past year. just show you the stock gen down 5% over the last few months. stephan, do you want to quick comment on the banks and why they are getting away scott-free today? >> the french sector is very

concentrated and secondly because it all is organized on the universal banking model, which makes them quite profitable. so there was no real worries about the french banking sector. the good thing is they not only passed the test but with a good level. bnp paribas had a ratio well above 10%. and when applied with the ad verse economics, they remain near 9% which really is a good level considering the minimum requested level of 5.5%. and i don't think anyone in france was expecting any of the large banks to fail. and i should say, steve, it's quite good news that everyone in europe is pointing the finger at france for doing their homework, and that's reforming enough, the economy. >> thank you very much for that. when we consider what has been thrown at the southern european financial systems and economies, interesting to see the reaction

this year, not just today, of the spanish and portuguese banks. the last time i rushed down to lisbon it was not the government crisis but this extraordinary story with bes, the ownership structure. we just didn't know what was going on. we pulled out the spanish names rallying again. i would suggest a lot of the good news is potential will any the prices. well, what do you think, for instance, over the last 12 months that sandovell has done? they are up. the evaluations rightly or wrongly of the spanish banks are elevated. they are trading at a greater level than the mean and price in the book and the banking sector across europe. they have a public sector and a bad bank as well. interesting to see in portugal the questions we are seeing as well. they are rallying 1.3% today. one of the groups that was

basically portugeuse with a rally. then we'll move on to germany with a look at the banks. most people will focus on this one and the enormous balance sheet of deutsche bank. absolutely enormous balance sheet. the shares today are down 27% over the last 12 months. trading at a significant discount price compared to the broader market. and there are concerns about things that weren't in the stress test, including litigation. that annetta brought up in her questioning to the press conference in the ecb. commerce bank upward 29% over the past year as well. steve, do you still have issues or concerns about the valuations

of assets on the book and the size of the balance sheet about the german banks? and more broadly, and especially, in relation to what you mentioned earlier, rwa, you don't like the evaluation. >> i don't like it in a risk sense. it's a little like value at risk which is fine until it blows up in your face. so i'm concerned about the total in europe. if you take instead capital to the balance sheet, then the european banks are still thin capitalized. >> weighted assets, but the latter is used by the americans, yeah? >> indeed. >> after this and many europeans have said these stress tests are more strenuous, the asset reviews, this is more strenuous than what we have seen from the united states. but in terms of the evaluation, we are still missing a trick in europe? >> i think we are. if the exercise is to not get surprised down the line, considering that the assets are

under severe pressure when you have economic development like deflation and basically recessing in europe by the end of this year. >> that's it, isn't it? the americans at the moment rightly or wrongly still have economic growth. they still have a lot of metrix. although volatile, they are turning up good figures. good unemployment figures as well. yes, we have questions about participation, we'll get to that, but the fact is they don't have inflation issues as much as of a concern here in europe. we'll look at the u.k. banks as well and the irish banks, we have -- it's hardly euphoric today as lloyd's is down 2.1%. the one with questions raised about it. rbs which the british government would love to start selling off their stake before the election trading at 36.5 in old money. in new money, 226 bar clays at .13 higher. a measured response today from the banking sector. stephan, let me hand it over to

you. let's have a look at the french banking sector with our guest host. what do you think of the french bank? let's have a look at the bnp paribas with stronger results, but the bank had to pay a hun finlg in the u.s. do you think litigation should have been taken into account? >> i think they need to calculate how much it is, but in the u.s. you have seen pretty much that a bank like jpmorgan pays as much in fines as it gets from support from the federal reserve. so it's an exercise of moving around the pockets in which the money is taken from and given to in terms of litigation. but in terms of the french bank overall, i think the french bank domestically and internally have very high capital requirements. i know for a fact some of the french banks demand capital markets to pay 15% funding cash for capital, which means basically they used to be 1%, 2%. the french bank is restrictive in the capital markets and it's

showing up in the stress test. >> all right. let's move on then. thank you very much. there's another world out there, really. anyway, much anticipated stock markets between hong kong and shanghai exchanges have been delayed. the trading link was meant to launch this morning. speaking to the press, hong kong exchange's ceo said they were awaiting approval but failed to clarify from which authority reuters report last week said a group of major banks asked for the link to be delayed by a month citing lack of data over taxation plans. with us now is seth miran, one of the companies that is reluctant to join in from day one on the proposal. what is going on here, sir? >> well, the link is very much retail oriented. the international investors are not going to be able to benefit

from this link. in fact, the hong kong exchange is going to be a huge beneficiary of it. because it's going to allow 15 million retail investors in china to trade in the hong kong stock exchange. so it's not really -- it doesn't go the other way. so our international investors, and we are a network of 750 of the largest investors, are not able to invest in mainland china through this link yet. >> what are the advantages, first of all, we talk about why your investors are in china, but what is the advantage of the china investors focusing on local shares. what is the advice of them trading on the hong kong market when they have access to this domestically? >> you are not allowed to day trade on the mainland. what this link allows them to do -- >> do you know how tough it is today trade? are they losing money doing this? >> i don't want believe in day trading but it opens up day trading for them and allows them to do it, not on the mainland,

but in hong kong. so i think it's a fantastic test of the capital flows that will arise from enabling. 50 million -- >> i think day trade is going to open up the chinese to more economic and financial market volatility, isn't it? >> i agree with you. again, i don't believe in day trading, but it does -- from a huge amount of the population on the mainland, to be able to actually start day trading per the first time, we're going to see -- you can see what mccow did and what kind of activity that brought. we'll see what activity it brings in hong kong. >> i'm sure london or new york traders who rotate on a daily basis are crying. or they are tieing in the day trading package to overly priced clearing packages. what about your clients? what do they want in the

mainland? >> well, the mainland, hong kong or china is actually a factory for ipos. and this is where so much money is going to be made over the next decade i would say, but again, they can invest generally those ipos to go public on the hong kong stock exchange. so that's fine to invest in the hong congress stock exchange and understanding the rules in english. so i think that our investors are going to get the exposure that they need but on hong kong and not on the mainland. >> steve, you know how tough it is to try to make a buck out of the chinese market as well. it's not just pitfalls out there, is it? >> china is one step forward and half a step back and that continues today. but the reality is from the regulatory side of china. every time they open a little fraction of capital flows, they will immediately have 50, 100

million people who want to trade it. so it's not like the u.k., you put up a new scheme, maybe 100,000 apply. you have multiples of millions who want in on the access. but it's also probably deep, deep down they are very concerned about the capital flight out of mainland china and hong kong. >> absolutely. can i just broaden this conversation a little bit, you represent u.s.-based operator that has been getting a bad wrap recently because people said they have gone into too many of the tile operation that is just decline and decline with all kinds of other players in there. what is your response? >> it's very important to understand the difference between dark pools. we are not all the same. our network is only the 750 largest asset managers in the world. our average execution size is 100 to 400 times that found on

the exchange in the dark pools. we were talking about the stress tests earlier, it's great that the banks have the capital today, but what they can do with that capital severely constrains. so the big banks have historically facilitated a lot of trading and equities in fixed income. what you need is when you have institutional investors that trade in the large size, you need somebody in the middle like us that can trade that large size. >> such a big conversation. we have to let it go. thank you for joining us.

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the oldest bank emerges with the stress test with a $2 billion euro shortfall. the majority of banks led by german lenders are getting a boost from the health checks as the ecb vice president tells cnbc stocks will continue to rally. >> we have seen the market recognition that in the low profitability that the banks had in 2012/2013 was very much affected by cyclical factors and it will continue. and the two biggest beneficiaries from the weekend.

results after the exercise fails to include the impact of the global crisis. and lloyd's on the pressure after passing the test reducing the possibility of making dividend payments. 25 european banks have failed the stress test which exposes a 25 billion euro capital shortfall among the banks that failed, 12 are already taking steps to cover the gap. the remaining 13 now have two weeks to submit a plan to the mid-essential banks requirements. a country by country breakdown show italy fared the worst with nine banks coming up short. and the world's oldest bank needs an additional $2.1 billion euro. greece and cyprus each have

three banks that failed. belgium and slovenia have two. well, the capital shortfall total, 25 banks had to write down 48 billion euros in assets and non-performing loans. let's go to annetta in frankfurt. i have to chuckle when i hear about the stock market, where stocks have been and why they are going up. he's a pundit, yeah? >> reporter: he is, indeed. my guess is he has a very tough securities disclosure policy. but joking aside, looking at what happened today in the markets, actually that plays down or goes down well in the ecb because those banks might actually fail like commerce bank is surging as we have seen the

market open right now. but aside this from the president of the ecb, he also had time and the possibility to ask him whether the ecb is also considering to expanding their unconventional measure tool by tapping into the corporate bond markets. take a listen what he had to say. >> it is not on the table. there were all these rumors in the media, but indeed the decisions we took are the decisions we took and we want to see how they work before we may have to do any rethinking. but right now we stick with the measures that we have taken. >> talking about additional measures, of course you need to

wait until those will finally change something or not, but looking at the deterioration or inflation i should say, just the five-year inflation expectation is dropping. so what is the plan? are we seeing qe next year? >> well, this decline in the inflation expectations is a measure of great concern to us. any central bank is always very concerned if inflation expectations are anchored. because then we know, all central banks know they are difficult to correct. so the -- why we took measures in september after they were taking measures in june, it was precisely as a result of having seen the expectation inflations coming down. so we hope that our program will change. the overall perception in the

market and we can normalize expectations and inflation itself. >> reporter: well, i guess the market expectation is that the ecb is not done yet but it's job when it comes to unconventional measures. but it's a difficult dance for mario draghi which he also has to dance together with the german society and also with the head of the bond bank. both men are not really on good terms as we hear according to a lot of sources and also there was that big reuters article last week which was saying that they are not at all getting along. so it's a big problem to have the bank not on board, but at the same time what we're hearing out of the ecb that the only men actually preventing qe right now is mario draghi because apparently a majority of the governing council member is in favor of that policy, too.

with that, back to you, steve. >> thank you very much for that, annetta. nice work this weekend. greece's third largest lender eurobank has failed the stress test saying it must raise 1.7 billion euros to cover the capital shortfall. speaking to us from athens is the ceo of euro bank. sir, thank you very much for joining us. nice to speak to you again are. you disputing this figure because i look at the latest headlines from you saying no capital shortfall, and the ecb says 1.76. what actually do you need to raise now? >> let me make one thing clear, there are not capital requirements for yeuro bank. seems like december 2013 the stress test was conducted. the euro bank has raised 2.9 billion of capital. and has agreed with the european

commission at a restructuring plan that has been approved. and as a result of the restructuring plan, the ecb has accepted that there are no capital requirements for euro bank. so i'm very pleased that this is the outcome of this exercise. which for us as a management team is a very good result. >> but in terms of the fundamentals of your country as well, surely under the stress tests, we should be very worried really about the state of the great banking sector. i mean, as we hear, you have an unsustainable debt load of 170 to gdp. very little growth at the moment still. there are still fundamentals to be worried about regardless of your capital raising efforts there. is that not the case? >> let me -- let me tell you one

thing as far as the economy is concerned, there is no doubt that the world is an unprecedented gdp contraction over the last six years. but the economy now is on the sole track of recovery. there is very much gdp growth being observed in the third quarter of this year. this is the first time in many quarters since 2008. and we expect that this solid growth will continue. there has been a lot of work that has been carried out over the last two years in terms of surpluses, in terms of adjustments, in terms of a number of policies that make and continue this growth.

therefore we are looking for the next year with optimism rather than pessimism despite the high level of debt which at this stage we think is not the important factor in the greek economy. >> let me just tell you, i'm sure you have seen this as well, citigroup upgraded you to buy but they have said your bank has the lowest fully loaded ratio including dtas. this is excluding dtas, which we're looking at deferred tax assets. a 6.5% as of the first half of 2014. 6.5%, that doesn't sound that high, sir. >> we are -- we are aware of our numbers. and we are aware of the fact that the ecb has conducted the stress test and came up with the result that came up. there is a lot of work that we are continuing on the operating

front. we believe that next year is going to be a year where we will be starting to create capital. as we move on into the next few years, we will be in a position to internally create capital. and improve the quality of our capital. and therefore the contribution of our capital will be much less going forward. >> i have one more for you, sir. i spoke to them in italy there on leading the new democracy by five percentage points, are you concerned of a political event to lead to a debt event that will negatively affect your figures and your ability to carry on growing and improving the financial position? >> we are -- we are a

professional management team that is doing our job. we are, of course, living grace. we still and do believe that there is a high chance that they may not be elections next year. and this is going to be quite positive for the markets and for the economy. we do believe that a lot of work has been carried out over the last years. and this has to continue. the path to reform is essential for the markets to look at greece in the positive spin. and this is what we expect from our policymakers going forward. >> it has been very good to speak to you again today, sir. thank you very much indeed for joining us. it's always nice to see london. thank you very much. despite upgrades from citi on the back of the stress test. we'll have a look at the italians. it is trading down 15%.

that's the difference. the euro bank is up 10%. bnps down 15%. i'm not sure you had the spread trade, but my goodness, a 25% difference shl in one day. we'll leave you with a look at bmps, the largest victim of the stress test, the largest shortfall of the european banks. synchrony financial partners with over two hundred thousand businesses, from fashion retailers to healthcare providers, from jewelers to sporting good stores, to help their customers get what they want and need. banking. loyalty. analytics. synchrony financial. engage with us.

all right. president petro paashenko says he's proud of the people after putting up a strong showing in the presidential election. the election shows there could be a continuation of the parenshenko and european public party. and dilma rousseff has been re-elected. in a victory speech, rousseff said, quote, she wanted to be a

much better president than there has been up until now. she looked at record spending and crowd services. a world of extremists clashed with german police in the city of cologne. police had to use water cannons against protesters. otherwise in italy, hundreds of thousands of protesters took to the streets of rome over the weekend. the march organized by the country's largest union aimed to highlight the state of the economy and the youth up employment rate which is 44%. the prime minister is pushing for controversial reforms aimed at legalizing the labor market. i make no apology that we dominated the show with the banks. i think it's a very important event, whether you believe it's a whitewash or bullish, i have

heard both views as well. there's a whole world out there, steve who is the chief economist, you just returned from russia. what did you tell people? >> i was there in january. it was already bad. this time it is terrible. people are very nervous. people really constantly are questioning sanctions and sang impact. the central bank policy is the weak rouble, so i find it very similar to what i experienced in the late 90s. and the stress test we talk about today doesn't even have a scenario like this. so i'm very concerned. >> the people have talked all the way through about the european sanctions being tepid and yet the ramifications of the behind the scenes actions, the european corporates in countries like germany are continuing the same amount of exports in trade. there are big ramifications

there as well. is it just mostly for the russian people or as europe potentially dips further into recession territory, for instance like countries in germany. >> i flew from london to moscow. there was less than 25% on the flight full. it is the first flight all year anywhere that i've been to, and i've been to 20 country this is year that was not 80% full. there's no business people coming. the hotel i stayed in, one of the better hotels, it was half empty. so, yeah, for russia, they have had ramifications but also you're losing momentum and the ability to do contracts. you're losing the ability. some of the ceos who have been trying to be neutral have been ousted as being too pro-russian. but there is this six to nine-month delay before the real impact of the economy comes through. so i think as we go into q4, q1, you will see russia being a much bigger dent on growth than we actually perceive it to be. >> as you said earlier, this is

not in the stress test, but interesting the dispute of russia is continuing with the ramifications growing as you say. and yet despite that, the oil price has been coming off aggressively. it's one of the outrageous predictions. you have seen this every year, some of them work and some are there to make a point. but one of them that has worked is the oil price coming down aggressively. is that a negating factor for the problems europe is having with russia and the lack of those big trade deals, the fact that they have a lower oil price now? >> it is very individual from country to country because some authorities increase the tax base on energy as the energy price comes back, but it is a positive. and if the economy will predict the market, it is pretty clear to me what you right is the unity price. so yes in six to nine months we'll see a small up based on that and the low interest rate we're seeing. but i think it is far more lacking than leading in terms of what goes on and is a true reflection of the state of the world today which is excess

capacity in every industry including oil. >> everyone is really excited about the ramifications for japan, for china, for india especially, although there are oil prices as well. we don't want deflation but we are desperate for the oil price. there's a contradiction there. >> that's the reason most policymakers exclude energy when looking at inflation. but the fact is if you want to increase disposal income and benefit 80% of the economy, the average guy on the street, getting lower prices is the impact that you need. it will also make the deflation go -- >> i just love the comment. all the policymakers strip out energy and then strip out food as well and say, it's all right, it's inflation. the two things we need. >> it's important. >> but why strip it out? why do they do that? because it suits them to soothe the numbers. >> they need the number at which

they operate. >> stephan, do you want to come in? >> let's talk about the agenda important for this week. the negotiations in france seem to be the only country that is not ready to make an effort to comply with rules. italy is going to make an effort, frankly. do you think we're heading to a clash? >> no, i think generally speaking as you know better than me that france is in a better position than we foreigners perceive them to be. i think within france you need to figure out what you want to do because the franc is not a problem based on the foreign or the euros. based on the fact that you have too nil state-owned enterprises and no ability to move the needle either way. so i think there's no more clash common than last year and the year before. but certainly as an economist, if you don't change your ways, transwill france will be in non-compliance

of the eu rule. >> the view is that france is not doing enough reforms, but believe me on the ground, there are some reforms. perhaps not as fast as the international investors would like to see, but hollande has made a few reforms so far and the government is working on labor reform. there are discussions on the contracts to keep it more flexible to help companies -- >> with portugal and spain, rhetorically, a lot of the work is in place but the actual rules are not working. as you have seen in italy, a little bit of labor markets reform in rome. in france you have the same thing. i don't think we as the average person in france or europe is willing, able to take the risk of actually changing. we defend on the state to transfer income. the market is under pressure, 51% of the population benefits from some transfers. >> but the employment rate so

high in france and the economic conditions not improving, i looks like the french people are ready to take reforms. this is what we have seen in the opinion polls. >> let's hope so. and i think in every single country there is this point by which you have an inflation point where things change. when people start to realize that getting transferred from the state is not going to pay the bill for all of society. but it is reactionary for people not to want the change because they are benefiting from this. you have the lag of the liberian who doesn't want to work in a different job. this is a european problem. that's why it is so high. >> let me ask you about the euro/dollar and your view over the next six months. a lot of people including david bloom are looking for the current 1.20 level. we are currently at 1.2695. >> i think the euro is in the $1.25 to $1.45 level.

i think there's a degree at to which we'll stabilize. currency is not going to do anything for the short-term. it will improve or make something negative, but i think what will change net and going into the federal reserve meeting this week as well is the fact that people continue to sit around and wait for improvement in the u.s. numbers. it's not common but part of the international economy. hence the euro/dollar will get a little bit. >> when you look at it, one minute you have underestimated where we have gone and the next minute you say don't under estimate it in qe. >> very valid point, steve. but the fact at what is going to change the u.s. policy is not the federal reserve. it will always be dollars and every time the market is down they will react. what is happening is that the reality of the economics growth is not going to be 3.5%. it will be 2 to 2.5%. the u.s. growth has been exactly 2% the last five years and is probably 2% as well this year. when the market starts to realize this, we'll take

expectations down and earnings down and the market will sort of get the dollar weaker. and the dollar has seen a peak right now. >> thank you very much. when we get the outrageous predictions -- >> early december. >> so four-and-a-half weeks. i always look forward to that. and you'll be presenting those, yeah? >> hopefully. >> i'm standing by the bull. nice to see you. we'll leave you with a recap of the market reaction to today's stress test. the banks are enjoying a relief rally. the vice president says this bullishness is set to continue. >> there was in the market already the recognition that the low profitability of the banks in 2012 and 2013 was indeed the very much affected by cyclical factors and it will continue. >> extraordinary when you get policymakers giving us interesting insight to equity

markets. falling sharply at the open, 15.2% lower there. >> this will allow banks to cops trait again on the lending, to concentrate on the business. probably we could see some consolidation looking forward. >> and he told us he's happy with the lender positions with shares amongst the biggest gapers in europe. all right. our guest host tomorrow is chris waltly, ceo of u.s. economics. for stephan and myself, thank you for watching "squawk box." up next, "worldwide exchange." have a good day cute little guy, huh? this guy could take down your entire company. stay with me. on thursday a hamster video goes online. on friday it goes viral - a network choking phenomenon.

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it's monday, welcome to "worldwide exchange." i'm seema mody. >> and i'm wilfred frost. >> lenders lead the world higher. and stocks should continue to rally. >> there was in the market

already recognition that the low profitability that the banks had in 2012 and '13 was very much affected by cyclical sectors and it will continue. le and the oldest bank emerges with a $2 billion euro capital shortfall. and edging to victory in the election, dima rousseff vowing to be a better president after receiving 51% of the vote. and the white house pushes back on several states to force quarantines for medical workers returning from west africa. you're watching "worldwide exchange." bringing you business news from around the globe. g