EC Needs Strong Leader to Guide Reforms: Gallo

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June 9 (Bloomberg) -- Alberto Gallo, head of European macro credit research at RBS, examines the candidates to take over as the next president of the European Commission, the issues that leader will face and how the next president may impact markets. He speaks on Bloomberg Television’s “The Pulse.”


We are joined by the head of macro credit research at rbs.

The queue for coming down.

Opposition to candidacy seems to be growing here.

What are the prospects for him actually getting the job?

A lot of investors underestimate the importance of european parliament.

I think the decision in the end comes down to who decides which is the most important legislative arm in europe.

Juncker is the leader of the leading party.

His country says you should take that into account.

Take it into account.

If you pick an external candidate who has basically just a phone line to berlin and paris, you underplay the real decision power of the eu.

I think we need a stronger europe going forward.

I also think the you k's card in this is a little bit in domestic politics.

The weakness of the conservatives versus ukip.

Or is this referendum about a possible eu membership.

Is it realistic that the u.k. could just leave the eu?

60% of imports and exports are from continental europe.

The u.k. is the biggest trading partner of europe.

You cannot undermine that without losing a lot of growth.

I think it is very important to have a strong candidate that is able to lead on reforms.

Maybe a common budget or potential eurobonds in the next five years.

When you look at juncker, he is old school.

I have been covering eu summits for 20 odd years.

He has been around for the bulk of that time.

He knows his way around the mechanics of the european union.

Nevertheless, the winds have changed.

There is clearly significant political ground that needs to be protected and gained.

When you look at a more compromised candidate that is going to keep everybody on board, keeping everybody on board is really important right now.

Is there anybody else that springs to mind that could fill that?

There has been a lot of external names.

From the epp -- there has been external candidates.

There has been candidates from other parties.

I think it would be interesting.

In any case, you need to reflect a strong leadership.

I don't know who would be the candidate.

External or juncker?

There is nobody else?

I think merkel is not a viable choice.

There is -- but he has very few votes.

These policies are some of the most interesting from an economic perspective.

He is proposing to use economies of scale.

The economic policies that he proposes are some of the most interesting.

But he has less than 10% of votes.

That could be an interesting choice.

The mandate issue here is a bit fuzzy.

As we were saying earlier, what the obligation is, is to take into account the elections.

You think that if they don't take them to account, if juncker doesn't get it, who is going to vote going forward?

Is it going to be even less popular than it already is?

Talk to us about the politics here.

We know david cameron is going to have a tough time selling juncker here at home.

What is in it for chancellor merkel to compromise?

There is a clear importance to keep the u.k. -- it is important to keep the u.k. in the european union but it is also important not to undermine parliament going forward.

The economic situation today, we are starting a recovery.

The ecb has just done a quasi-bazooka last week.

They will do more next year.

What they always say is, governments need to do the right reforms for europe to be resilient through the next recession.

We need a banking union and the parliament is doing that.

We need a mechanism for a stronger budget, these countries are going to have a problem again.

Let's say juncker gets the job.

How should i price that into assets?

Is there a way you can think of?

I think if you get a very weak president, somebody with a phone line to paris and berlin -- and you have anti-euro politics in france, in the u.k., then three or four years from now some of the week countries may have a problem again.

I don't know if it is going to be priced in now.

The investors just look at what the ecb and the central bank are doing.

We are going to go lower in spread and higher in european stocks.

I think for a portuguese ten-year bond or a greek ten-year bond, this is a very important choice.

We need somebody who is pro-europe, who is not afraid of making steps which are sometimes in conflict with france or berlin.

So we need a federalist?

I think for the viability of europe, we need somebody who is pro-europe.

The u.k. will have to decide whether it is in or out.

We believe it there.

Thanks so much.

Let's find out how markets are trading this morning.

Caroline hyde.

It is risk appetite on the table.

We have got optimism about growth in japan.

You saw gdp rise more than a speck it over there.

Optimism in china.

Exports driving up higher even though imports were weaker.

We get european sentiment data in just 10 minutes.

Stoxx 600 up 0.2%. nine markets are shut but still

This text has been automatically generated. It may not be 100% accurate.


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