There Is Resistance to Debt Relief, Papaconstantinou Says

Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, Bloomberg dot Com, and of course, on the Bloomberg David Gura in New York with Tom Keen. This is Bloomberg Surveillance on Bloomberg Radio. A couple of years back, I was on a reporting trip to Athens. There was a protest on my final night there. Parliament was debating. Crowds gathered in Syntagma Square and towards the end of you homemade game selin bombs

were thrown. I gather the same thing played out last night in Athens as parliamentarians debated another round of austerity measures. Quite pleasure to have with us here on Bloomberg eleven three our studios. George Papa Constantino, the former Finance minister of Greece. Get us up to speed on what's going on here. We're looking at the Eurogroup meeting I gather today or tomorrow this week in which the next round of this is going to be discussed in more detail.

Where do things stand with the Greek economy at this point? Good morning, Yeah, we are up to for another Eurogroup meeting and it will basically conclude that the conditions are there to to disperse the loans for Greece. This is following passing in legislation this week with all the necessary measures,

the fiscal measures. So what remains and the next step, and the interesting step, so to speak, is the discussions uh within the meeting and also outside between the I m F and Germany on that relief, because everyone recognizes that you need some that relief for Greece to be able to grow basically and clear the clearly the sky a little bit for for as you move forward. So the conditions for that relief are going to be discussed.

It's clear that there will be no decisions for immediate implement implementing for immediately implementing that relief, but the parameters will be said to have that relief after this program

finishes in the summer of two. Once that's done, that's the trigger for the ECB too then include Greece into its quantit visa program and for Greece to then go back into the markets for the first time since two thousand fourteen and start a process of normalization which will allow it to not be completely out of the woods, but at least you know, spreads will tighten and and after the program finishes, we can have a some light follow up arrangement like a credit line, so to speak.

But start finding yourself on the market again. We understand that your sense of the sustainability of what the your group president proposed this morning, a primary surplus of three point five percent for for five years, is that something that you think is sustainable? Look, it's can we do promise of troup and five, Yes we can. Is it a good idea? No, it's not. I think they're the aim if is right, it's too high. The only reason why it is there is because it reduces the need

for deeper debt relief and therefore makes Germany happy. At least your own dine Symplome is not proposing the original idea, which was ten years of three Maybe the minister can help us, David, you went to Athens here recently? Is it Hydra or h H y d r A. It's h Hydra. That's right, David. We need to do a remote with the Finance minister from here happy that was Sophia or rendered that movie a million years ago. It's like it's like it's like beyond gorgeous, is what I

You were with the London School of Economics. Paul Degar is there right now and he agrees with you. There must be a debt workout. Why do the elites of central core Europe don't want to do what you want to do and what politic War wants to do because it's called politics, because it isn't just they don't want to open up their wallet. Well, it's a communisturation out,

it's a combination of things. I think there's there's a deep seated kind of resistance to UH to dead relief because it's hard to sell to the their local constituencies and taxpayers. It's clear, but when we're talking dead relief, we're not on nominal haircuts because this is this is money lent by the official sector now and so you can't tell the taxpayer. Well, you know, sorry, we told you're gonna we're lending grace, but we're gonna get the

money back. You know, I guess what we're not. It will be extending the maturities longer, gray spirits and hopefully also locking in lower rates. So that part is that, and part is that they're not trusting the Greek political elite in the Greek political system, and that's why any kind of dead relief is going to go hand in and with conditionality, with an assistance that Greece continues through the structure of films for some time. That's the time

we have. Thank thank you so much for coming. We could go on and please don't be a stranger to that remote we're gonna, we're gonna get to the island. Thank you very much. David, give us Audi here and I need to do a data checker. Unfortunately, we're pleasure of George pop Constantina with us the former finance Minister of Greece, Joan Bloomberg eleven three oh studios here in New York today. Decisively, the curve is flattened below where

we were in November eighth. We have had a full circle on the November eighth Trump trade if you will for the president, not all because of the president, but we had a steeper yield curve enthusiasm about fiscal policy in at nineties six basis points. We are decisively below where we were the evening of that election. Worldwide, this is Bloomberg Chris Kasanti with us who wants like next to no stocks, He's like, really a focus port folio is alphabet? Is I hate to call it? Is alphabet

part of your your wisdom? It is not, Tom, although Apple is Apple is one of our largest positions, mostly because it's gone upset. How do you do that? This is you know we're coming up on the sea if exam so we get a little wonky in the in the June Chris Krossani, what do you do when you go in with a three or four percent position and heaven forbid your successful and it becomes a seven percent position?

What do you do? Is small? For us, Tom, I mean our average position size is five or six percent, So you percent Tom, so we won't go over to double digits. But for Apple it made sense value wise. It was ex cash nine months ago, now less than ten times earnings. It checked all the boxes. So what do you do with the funds? Just just sell Apple? When you get up to ten percent coverage, do you say, Hey, that worked out, Let's find something the same. How do

you find the next value the next Apple? Well, when you have the luxure of only owning eighteen stocks and you're only buying four or five a year, um, it's it's really a one off. We're not saying, oh, let's go into this field, let's go into that. We we're looking at the numbers are each individual company. So that's a real luxury in our clients are not expecting quarter by quarter results to beat the SMP. But over a long period of time, we had a lot of value.

Give us a sense of of what you think happened yesterday. Yes, the story continues to evolve and undulate, but we've had a lot of uncertainty and a lot of these stories pop up over the last hundred plus days. What was it about yesterday that that spooked the market? No, no, no, I think it's a uh, David, I think it's a significant event because for the first time since the election, after all these crazy things from the White House, we finally got something that bled over into the market. Now

is it a seminal event. I don't think so. So everyone's talking impeachment. Everybody's talking the president is mortally wounded. We don't believe that's true. The Republicans still control both houses of Congress. The president still has enormous leverage under our political system. Once we stop talking about independent Council for a moment and then start talking again about regulatory reform, tax reform, I think you'll see the market start to rebound.

I don't think. I think this is a blip, not a reversal. How much do you allow yourself as an investor to be swayed by sentiment? It seems like yesterday was, at least in part, a sentiment driven event. I think it's almost entirely sentiment driven event. In fact, I think moments like that where the vix spikes twenty or twent in a day, those are the opportunistic moments rather than the moments to head for the sidelines. And I'm not

talking about you know, bi speculative stuff. But when you get a Wells Fargo or a Slumberge that that are trading near their cycle lows, the panic of yesterday would be a good time. And maybe the panic of today too, was it? Was it a good time to buy? Where did you see the opportunity yesterday? We did buy some more Wells Fargo yesterday, for example, I think the premier bank.

I think over the next ten years, if you pull back the lens and think broadly, we're gonna banks are going to be doing more banking and less invest spend M and A stuff over the next ten years. And Wells Fargo is perfectly positioned for that. We talked about Walmart earlier, which ten years trailing seven points something percent per year. I'm just gonna call it a mediocrity just as a general statement. What sticks out like a sore thumb is they've got the cash flow of an island nation, right,

and I don't believe they're giving it the shareholders. Am I too harsh? Well? You know one, it's the law of large numbers. It's you know, sere for such a big company. Ain't bad um. But the second thing is wow, talk about competitive challenges obviously from Amazon, but from other places as well. We have a German UH discount grocer coming into the market right now, etcetera, etcetera. They may be conservative in hoarding their cash because they see things

that you and I aren't seeing. Right, I'll go with that, but come on, well, we Chrissanti with this with a grossanti capital management. And I guess I don't want you to come in on a tweet, Chris, but I do want you to comment on the effect of Washington upon market animal spirit. Forget about nominal GDP, just the enthusiasm and confidence of the markets. Well, it's funny. I'm reminded eight years ago every time during the financial crisis when Obama would get on TV, the market would start to

remember this go down a hundred two hundred points. And and every time I see one of these tweets, especially now that we're in the firestorm. Uh, I almost said on television this morning, Tom that that at least we haven't had a tweet, maybe he's gotten some religion. And of course I was forty five minutes too early, thinking that, remember done, and and what the market cares about, it obviously is not Trump. It cares about tax reform, it cares about regulatory relief, and and just this gets in

the way. And so what we're hoping for is is it too much to ask for twelve hours of radio silence of Paul Ryan leading with tax reform instead of Independent Council. I think he would prefer that as well. Mr Ryan would prefer that Let get your sense of the economy right now, let's move away from from politics. When you look at the fundamentals how this us. Never think with the market yesterday and today that the things were,

you know, quite as good as they are. You have I S M numbers that are in the mid fifties, you've got corporate profits that are beating estimates in the first quarter, and you've got things accelerating. So we're actually excited. We're buying high quality names at the sell off discount prices of yesterday and perhaps today. So I'm looking forward to this being an opportunity as we get to the kind of long slog of the methodical and thankfully quiet

work of the Independent Council steptail the two of these things. UH, there was a time right after the election when people were buying stox based on where they thought the new

administration was going to go. When you look at tax reform, regulatory reform, healthcare reform, UH dovetailed with with where the economist day, are there opportunities there are still in terms of what you think that the legislative priorities are in Washington are the things that you think a would David, because what I think has happened is, starting yesterday, the market seems to be discounting no tax reformat and it's going to be a tough slog. Believe it's an uphill fight,

even though the Republicans have both houses. But it's there's not a zero chance. You know, I'm thinking fifty fifty, especially on corporate tax reform, and maybe better than fifty fifty. So if we get something like that, there are a number of companies in everybody's portfolio that will benefit to the tune of ten or twenty earnings growth without doing a thing from corporate tax reforms. So we're hopeful that that comes back to the headlines rather than all this stuff.

You like Milon, and I love the rationale you give. We love a company with low expectations. Sure sure, Now Milan is the Teresa May of the stuff you come on. You see Milon, You're not thinking things are gonna be very good, and they surprise you on the upside. So what Milon has against it is a tough headwin. In generic drugs, this year and next year it's sold off

more than fifty. But what people don't think about is it's one of the two or three big companies that has the wherewithal to really generic size these blockbuster dugs. It's just going to cost a lot of money and over again. Remember our time period is four to five years. We're thinking this is where healthcare is going, and Miland is right there at the intersection. Loyal I want to go on oil where it's just been range bound with a saggy is to one on imax, and I mean

the hydrocarbons have the life of their own. How do you deal with that? You know, you take the long view, tom, I mean the positive on oil, especially on the bigger ones because the bigger ones that they've done the investing, the ten years worth of investing to big to drill deep holes in the water or in cold areas, and now they're finally going to get the cash flow from that. But all the companies, because of the oil crash over

last year's have under invested. So we're gonna start to run out, whether it's at the end of this year, whether it's two years from now, four or five years from now. That price is going to be higher. Chris Kasanti, thank you so much. We need to go back to Martin Schenker has given a terrific perspective in Washington Or there's work over decades with Bloomberg News and of course with The Wall Street Journalism brought to you by Bank

of America. Mary Lynch dedicated to bringing our clients insights and solutions to meet the challenges of a transforming world. That's the power of global connections. Mary Lynch, Pierce Feeder and Smith Incorporated Member s I p C. There's something new from Bloomberg. It's called Lens. Starting right now, you can use the Bloomberg iOS app off your iPhone or iPad, or our new Google Chrome extension to read any news story on any website, scan it, and then instantly see

the news stories relevant market data from Bloomberg. In addition, see all the bios of the key people mentioned in the story. It's called Lens, and it is just that, a lens into the people and the data of any story you may be reading. Again, Lens brings you the power of Bloomberg's news and data. Download or io s app or search for the Bloomberg extension at the Chrome Store to try lens out. Learn more at Bloomberg dot com slash lens. Let's go to Greg Value now. He's

the chief global strategist at Horizon Investments. He joins us always valuable to check in with Greg get a sense of what's going on in Washington, the pulse of Washington. We're looking at some tweets fired off by the President this morning, one of which reads, this is the single greatest which hunt of a politician in American history. That comes after the assistant the Deputy Attorney General yesterday named a special counsel to look into Russia's involvement in the

US presidential election. That's Robert Mueller, the former director of the FBI, former of Council at Wilmer Haile. Greg, great to have you with us. Uh, what changes here now that we've seen the president way in There were a few hours of quiet and which we were processing what has happened, what was going to happen, what's changed because of the eastweet? Well, I tell you, David, I think as usual with indiscreet and UH complicates things. To have

the president already criticizing this process. So I don't think he helped his cause, and as we all know, self inflicted wounds is one of his specialties. You've wrote about loyalty yesterday and this president's relationship to loyalty. We were talking with Marty Shanker, our senior executive editor for Government Economics, a few minutes ago, and I asked him about the short love affair this White House had with Rod Rosenstein last week. A lot of praise for him, career prosecutor,

longtime public servant. It seems now with these tweets, the President has turned on mr Mr Rosenstein. What does that say to you about loyalty in this president? Well, he demands it, but he doesn't give it. Uh. There's been stories for the last week or so that he's dissatisfied with virtually everyone at the White House, including Jared Kushner. So is he now is feuding with all of his subordinates That just makes them even less inclined to support Yeah,

this is fascinating. We've got an extended time with Mr Valier this morning, which is always a good and beautiful thing. We're going to stay in the theme of the moment, and I want to go forward to the midterm elections in our next section with Mr Valier, greg is always you lead your notes strong this morning with the horizon on the Vice President of the United States. Who is Mr Pence, the former governor of Indiana, And because of

who he is, how does he adapt to this? Well, Tom, first of all, he is the anti Trump uh low keied, modest, doesn't brag, monogamous, deeply religious of altar boy in his youth. So from that standpoint, he's different. From a policy standpoint, he's more traditionally a Republican, pro trade, pro business. I think that the Republican base could very very much get along with the president Pence has would the mark. What is Pence's relationship with the White House? We have Mondale,

we have other vice presidents, Mr Biden. Obviously, how do you fit Mike Pence into the day to day grind of the Trump White House? Well, I think he's one of the survivors. Obviously, he fits in pretty well. He has great contacts on the Hill, gets along with Paul, Paul Ryan and others, So I think he does fit in. And this is someone who's got a lot of experience as a member of the House, as a governor, and I again, in so many respects, Tom he's the anti Trump.

Let you mentioned the discord within the inner ranks of this administration. The president preparing to take his first trip overseas, and number of the men and women you mentioned will be accompanying him on that that trip. How was the discord that we've seen in Washington over these last few days going to come come with him to Europe and to the Middle East? Or will it? Are they content

to leave it behind? Well? I think it'll it will follow him, and knowing Trump, and I mean, let's face it, guys, for the last couple of weeks, there's been a bombshell every day, sometimes two bombshells every day. This morning there's new reports about from Reuters about contacts with the Russians. So it's it's it's an ongoing DRUMA from me, guys, I think that the big story is going to be

his talks with the Israelis. There are a lot of prose Raeli folks that I've talked to recently who were concerned by what he told Abbas, the Palestinian leader a few weeks ago. Will he do things that could make the Israelis nervous? Jesus Ford Greg to our next section. Can the Republicans lose the House in the mid term? They could? I think the odds slightly favored of keeping the House. They'll They'll keep the sound for sure. Greg joins us. He is from New Hampshire. Greg, when did

you first learn about Mr Ailes? Was it with Nixon or was it a campaign after that with Lee att Water? Well? Yeah, during those days, he was a fascinating and polarizing figure and he continued to be one for the rest of his life. I mean a dramatic impact on all of us who are in this industry. How associated is a Republican party that you follow every day? We were going to talk about the mid terms, which was his belly whack years ago. Um. How how Roger ale Z is

the GOP right now? Well, I think he is one of the architects of the agenda, much more combative, far less conciliatory, real really going after issues with a ferocity that we hadn't seen in previous decades. When you look at the mid terms and we are still a few months out from from them taking place, what is what we've seen over the last week in terms of how lawmakers on Capitol will have regarded and positioned themselves relative to the president. Tell you about how they'll do that

going into the mid terms. Is this the president they want to continue to affiliate themselves with. For now, I don't see a total rupture, but you know, the cliche is a week is a lifetime in politics, and you know the following eighteen is a long long way off, so you know, things things could change. I do think if if the new special prosecutor it gets more bombshells, if we hear more about Trump and Russia, you will see a lot of Republicans, especially in the North, abandon him.

Not that I would ever correct Greg, Yeah, but Mr Gurl, I would suggest it a week is not a lifetime and it's more like three hours. Or trying to get David, what are you looking for out of this trip that the president is going to take. Is the achievement going to be him successfully navigating these ten days on the road or is there a broader theme to the trip that he's about to take. Well, I tell you, excuse

my French, but they just can't screw up. I mean, I think that's a low bar to clear, but that that is something they have to avoid. Any kind of clubs or faux pas things like that. Beyond that, I would look at the Israeli talks because there's speculation that when a boss, the Palestinian leader, was in Washington, Trump made him some assurances, and I think a lot of the pro Israeli types are apprehensive about what assurances were given. If we could get back to economics, thank you, folks. Well,

what's your emails about? You know? The news flow, Greg Velier, our Vincent del Judais has an important single sentence. The government also reports that the total number of workers on unemployment roles dropped, falling to the lowest level since Watergate three in the weekending May six. This is two Americas, and yet your new Hampshire is in some ways flat on its back. How the polarity of our job economy is extraordinary. You know, I was in the Hampshire a

couple of weeks ago. They've run out of workers. Everywhere you go. You see signs help wanted. When I travel around America, Tom I asked business leaders, what's your this problem? And they all unanimously say, lack of skill labor. Where's the wage growth? O wise one, Well, I think it's coming. It's it certainly has taken a while, but if you're Jenny Yellen, you gotta worry that by fall they could

be way behind the curve. By fall, we can see wages really taking off with the feeds still being maybe to accommodator, Greg ll Thank you so much. We value your tendencies with Horizon Investment. Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm on Twitter at Tom Keene David Gura? Is that David Gura? Before the podcast?

You can always catch us worldwide on Bloomberg Radio. Yeah. Brought you by Bank of America. Mary Lynch. Dedicated to bringing our clients insights and solutions to meet the challenges of a transforming world. That's the power of global connections. Mary Lynch, Pierce, Fenner and Smith Incorporated Member s I p C.