Tensions Fray Italy's Coalition: The Pulse (7/19)

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July 19 (Bloomberg) -- On today's "The Pulse," Guy Johnson provides commentary and analysis from Asia and the developing stories from around Europe along with a look-ahead to what's likely to dominate the U.S. business agenda.

Italy's ruling coalition phrase at the edge and.

S. a key minister faces a vote of no-confidence today.

G-20 finance ministers meet in moscow.

A finance minister says that growth is returning to the french economy.

In a few moments, we are live with b the south african finance minister.

Google and microsoft missing estimates overnight.

Good morning, welcome.

You are watching "the pulse" live from london.

I'm guy johnson.

Coming up, the battle for london's airports heating up.

Ryanair's ceo challenging boris johnson's plan.

He calls for a shutdown of heathrow.

O'leary wants 3 new runways at each of the existing airports.

He will join us to make his case for that plan later on in the program.

We will be talking telecoms today.

Vodafone's service revenue dropping as the price were in germany combines with a slump in europe.

Vivendi has turned down a bit from softbank for universal music.

Our reporters bring you those stories later on.

Politics front and center in europe.

We start in italy where the ruling coalition is certainly fraying.

The prime minister is accusing his adversaries, while alienating long-term allies.

The pressure builds today with a no-confidence motion against the interior minister in the senta ate.

And a possible indictment for silvio berlusconi.

Let's go straight to italy.

We are joined from milan.

Dan, this sounds dramatic.

How serious a threat is it to the administration?

Well, probably we will get the outcome of the vote, the no- confidence vote around midday.

It i s expected that the justice minister will survive this vote.

Mr.

letta has enough support to get this vote through.

It's been a bizarre series of events that has arrived at this point.

The italian president did not like the shape of things.

Did not like the developments this week here he was forced to intervene yesterday, saying that it is just not the right time for a full-blown italian political crisis, for the government to fall with the economy mired in deep recession.

This government trying to adopt measures that will stimulate growth.

It is just not the right time to bring down this government.

A lot being made of mr.

Berlusconi's predicament.

Is that the more serious threat?

9 actually, it is not.

Mr.

berlusconi has been very careful in diplomatic and trying to separate his legal trials, the criminal issues that have come up, from the political survival of this government.

He is being very low key.

Mr.

letta is trying to take advantage of that.

Letta's biggest threat is from the democratic hearty.

Because you have these dissident members, lawmakers who are led by the florence mayor, this 38- year-old rising star who feel uncomfortable, who have felt uncomfortable from the very beginning of letta forming a government with berlusconi.

It is likely that some of those lawmakers will vote against the justice minister today, but it probably will not be enough to bring him down.

Dan, thank you very much indeed for the update.

Fascinating story.

From milan.

In spain, the prime minister is facing a growing backlash over corruption allegations.

Thousands of people taking to the streets to demand his resignation.

That comes after a former political party treasurer has claimed that he took under counter payments.

The demonstrators started peac eful, but started to turn violent with ride police clash with protesters.

All of this comes at a time when anglo merkel is gearing up to kickstart her election campaign.

She has her final pre-summer press conference today.

We are looking forward to that starting shortly, and we will bring you the live pictures.

David tweed joins us from berlin.

What is she expected to say?

Is this a look back or look for?

Ward?

It is both of those things.

This is the annual end of summer or beginning of summer press conference.

What we will find out in this press conference, we will find out whether she plans to take her normal three weeks, or whether she will shorten her summer vacation this year to two.

That is the sort of information we will find out, because what she is doing right now is giving a short introductory statement.

She started talking about flood aid.

But then after she has given this short introduction, then it is a no holds barred press conference.

Any questions can be asked.

It is expected to be dominated by one of the issues that the newspapers here have been full of for the last three weeks, and that is the whole case of the u.s. buying in germany and other parts of europe, the prison sch eme that was set up by the national security agency whereby collection data was collected from some of the biggest internet companies like facebook and google and apple and yahoo.

Huge issue in germany, because the germans had two totalitarian regimes here in berlin.

In the last century.

Merkel gerwrew up in east germany.

The background of the stasi is an enormous issue that the opposition is trying to make into an issue.

The thing is, though, it has been floating around for the last three weeks.

What we have seen lately in the polls, angela merkel's party strengthening their position.

The opposition is up since the end of june.

She's actually strengthen her position as the elections loom.

Do you think -- what are the other topics of the opposition will use may be to try, to work against merkel?

We sell reports recently talking about a rising level of concern about it was happening in the euro zone.

Is it more about the domestic economy?

What are the other issue she will be asked about today?

This is the most extraordinary thing about the election is that the opposition has not been able to find an issue in which they can attack angela merkel.

They have not been able to hit her over the handling of the eurozone crisis.

It is her handling of the crisis which people put down to the fact is she the most popular politician in germany.

People trust merkel.

Still, there will be headlines out of the press conference.

We will continue to monitor events.

You see anything, you will let us know.

We have been hearing from the french finance minister this morning.

He has been speaking to us at the g-20 meeting in moscow.

He told us growth is returning to the french economy but the government needs to cut spending and encourage investment.

He spoke to us about the reaction to ben bernanke's tape r talk.

We need unconventional tools in order to address the crisis, the growth crisis we are in.

Of course, the monetary policy from the fed is important and smoeomehow precious.

There must also be exit strategies.

As soon as the american economy is getting better, we can understand what ben bernanke he means.

The g-20 underway in moscow.

We have been hearing from finance ministers this morning.

It's tough to another one.

-- talk to another one.

We are speaking with the finance minister of south africa.

His first interview at the g-20. thank you very much for joining us.

I want to start by asking you about ben bernanke and the prospect of the u.s. beginning its exit from stimulus.

In may when they started talking about it, you warned him to make sure he does not spook markets to cause problems for emerging markets, but that is what happened in south africa.

The ran tanked tanked.

He has made comments since then.

Has he done enough to ease this problem for emerging markets?

The issue is not mr.

Bernanke.

The issue is how do markets respond to him.

I think he has done enough now to get across he is understanding.

The ta pering processes based on data.

It is not something that will happen tomorrow morning.

That all of us have time to adjust.

The crucial challenge is how financial markets manage these signals.

And how they manage in a way in which emerging markets and their currencies are not negatively affected.

The rand remains one of the world's most volatile currencies.

To what extent is that affecting investor confidence, and what can you do other than tell bernanke to be careful in his comments?

What else can south africa due to mitigate it?

On the one hand, all of us are looking for a better global environment.

And clearly we do not have that at the moment.

Secondly, we have always warned emerging markets that sentiment should not drive investment processes to the point where you introduce this in word-out word volatility.

Each of us have our own domestic context.

The mi ning industry in south africa and stability in that industry is a key concern.

The government has done a lot in order to bring all of the players together around the table and get an agreement.

Many of them are willing to sign on to it.

We will continue that process, to stabilize that sector and reduce the internal noise in south africa.

You said last years, the strikes cost the economy something like half a percent.

How much are thet strikes, we have seen so far, cause the economy so far this year?

Our calculation was 5 billion or 6 billion rand.

Most of the industry has returned to normalization.

Much of the industry in coal, ir on ore, manganese sector, it was largely platinum in the first instance and some extent gold.

That is why we are putting these efforts into stabilize the sector.

I think we have factored in some of these losses.

We have more normality the abnormality.

I think that means it's better.

Less than half a percent?

Hopefully.

The global context has also changed.

The demand has changed.

Commodity pricing has decreased.

Demand has become lower.

Structural issues are also there.

The central bank lowered its forecast for south africa growth to 2%. the european forecast is 2.7% is that too rosy a picture?

For a long while, you have been ruling out the need for fiscal stimulus.

Do you think that is the case still?

We're not ruling out that growth is is likely to be lower, somewhere between 2 and 2.2%. we will give our final number in october.

Secondly, the revenue picture is not looking too bad because inflation has been mitigating that in nominal terms.

Third, we will have to accommodate our spending patterns in line with our revenue picture.

We have demonstrated that over the last three or four years.

Within this, we had real growth in expenditure of 2.3%. even during the last year or so.

That hopefully continues to leave a supportive element to the economy.

I want to ask you, because we are in moscow, russia will hold the winter olympics next year.

South africa, everyone knows how the olympics.

In terms of spending, you have to spend a lot of money to hold and olympics.

You had a bittersweet experience.

The fifa world cup.

We are staying away from the olympics at the moment.

They are much more costly.

Forgive me.

It was a tremendous success in terms of infrastructure investment.

That kind of investment that we have put in place, and that was being delivered in 2009 in terms of infrastructure helped the economy.

Part of it was companies fleecing the state, collusion.

So that is what i want to ask you about . what would south africa have done differently knowing what you know?

And what would you recommend to russia as it gets ready for its olympics in terms of trying to control corruption or for that matter brazil that has the world cup coming up?

Every major engineering project has a couple of challenges.

Make sure you stick to the scope you designed.

Secondly, keep an eye on the scope creep.

Third, watch the costs.

Some of them are necessary, but many of them are costs you can control.

Fourthly, make sure you have a private sector on board that is ethical and the way it conducts itself.

I am going to pass your advice on to the russians.

$30 billion spent on the olympics so far.

Back to you.

Indeed, the finance minister of south africa there.

Coming up in this hour, ryanair challenges boris johnson's plan for heathrow.

Michael o'leary explains why he thinks london's airports need to expand.

? welcome back.

You are watching "the pulse"." european techs under pressure after to mrs.

From google and microsoft.

Tech check.

Let's bring in caroline hyde.

A bit of a miss on the add side for google affecting the numbers.

It is about monetizing mobile.

They've got their very own operating system, android, to be accessed on smartphones.

Why is the age old formula of getting more people online not meaning more revenue?

The reason is because mobile advertising, the cost per click to advertise on mobile is cheaper compared to a pc, 40% cheaper.

We're not not seeing the feed through in terms of revenue.

As we search more on tablets and smartphones.

Larry page saying that there are loads of big opportunities in the market.

Shares up year to date on the hope of new innovations, google glasses and moto-x. but it is not making up for their co-business -- core c business.

The click through rate dropped 6%. it's not great.

And expectations are high.

It is a different story when you look at intel, windows, microsoft.

What is clear is that the pc story is making life very tough.

There is concern about global overall.

That is the theme linking the two, because they're not getting onto mobile quick enough.

The deterioration in pc sales because we are going to tablets.

You can get the same functionality far cheaper.

Consumer pc's down 20% according to microsoft.

Profit down by 1%, the biggest this in a decade.

We are looking for a 12% gaine i in profit.

The move to mobile has not been paying off.

The windows tablet a $900 million charge.

Fewer consumers want this first tablet might microsoft.

Pc sales deteriorating.

The move to mobile, the restructuring unveiled by steve ballmer cannot come quick enough.

Let's go from tech to telecom.

Vivendi is that you have turned down a bit from softbank for his universal music vision.

$8.5 billion.

It is quite a large number to what we thought was a doomed industry, the music business.

Universal is the world's largest record label.

Lady gaga, justin bieber, they are on universal.

This is something you would like to say about a proposed deal.

It is not as crazy as it sounds for softbank to pay top dollar.

This puts a new light on the breakup value of vivendi.

Universal music is one of their smaller units.

By profits it is smaller still.

Vivendi is a very diverse collection of assets that have been targeted for breakups over the years by investors.

This does put into question some of what vivendi might be worth in pieces rather than a whole.

There are a few investors wondering about that.

Ok, still toc come, the battle for london's airports heating up as mayor boris johnson steps up calls for he throws demolition.

Ryanair's ceo says it should be even bigger.

The boss of europe's largest budget airline joins us in 10 minutes time.

? good morning.

You are watching "the pulse"." we are streaming on your ipad, your tablet, etc.. and do not forget bloomberg.com.

The markets, what are they doing?

Let's get a quick look at equity markets.

You have losses of half a percent in paris, london, and frankfurt.

The standout industry is the tech scector.

The majority of industries are up today.

Pc sales carry on falling.

The tech sector down in the u.s., and in asia and europe.

Ben bernanke, he came, he spoke, he spoke.

The market barely budged.

His message that tapering is not tightening.

The market has the message.

Treasury yields are down.

Down one basis point.

In the fx market is going to be about the dollar against the pound.

They say look at the central banks, the fed versus the ecb and the boe.

Draw your own conclusions.

Thanks much indeed.

What do we have coming up for you?

Ryanair challenging boris johnson's call to shut down heathrow airport.

Ceo michael o'leary joins us in a few minutes time to explain why he thinks london's existing airports, all of them, need to grow.

As we head into break.

Formula one champions want a sopaap box derby.

This is sebastian -- ? welcome back.

You are watching "the pulse" live from london.

I'm guy johnson.

Francine lacqua off today.

She'll be back monday.

These are the top headlines.

Once a symbol of industrial might, detroit has become the biggest u.s. city to file for bankruptcy.

The carmaking capital has been hit by decades of decline and is too poor to pay billions of dollars in bond holders.

G-20 finance ministers are in moscow today.

Treasury secretary jack lew told us that for the u.s., europe remains a major concern.

We have been making the point at these meetings that europe does need to look at what he can do can get the.

Engineof growth moving again the world needs europe to grow.

We made the case to china in particular that they need to go through internal reforms to get their economy moving.

And japanese markets have a turbulent session before this weekend's elections.

The prime minister is set to win, giving them control of both houses of parliament.

Victory would give his party a strong grip on power.

As he tries to revive the struggling economy.

Let's get the view on what exactly we will learn this weekend from japan.

Our new asia columnist joins us.

It will be a super majority?

And what do you make of today's market action?

Certainly it will be a very predictable election.

Markets are reacting to some extent, but this will be a big victory for the prime minister.

In many ways it comes down to five words.

Now the hard part begins.

Winning this election for this party is the easy part.

It is about implementing reforms that the prime minister has promised.

What we forget is a lot of these reforms will not be popular with his own party.

Even if he wins the super majority of both houses, it does not mean he will have an easy time.

One problem is the trans-the civic partnership, the trade deal.

In order to get this to, he has to upset the ldp's support base, farmers and fishermen.

It is not an easy sell.

That is one example of how difficult it will be to get the third arrow of his reforms throug through.

It will be an interesting period where investors will have to sit back and wait.

The structural reform has to start in earnest.

Will this have any implications for regional politics?

Will it embodlen the prime minister to take a different line when it comes to beijing?

-- will it embolden the prime minister?

Will he take the mandate and turn course away from domestic politics, away from domestic economics and focus more on the beautiful japan, as he calls it.

It is certainly something that china is worried about.

South korea is worried.

It is fascinating because last year when they were planning to take the reins and china, i doubt he was expecting resurgent japan to be, locating his agenda.

Geopolitically it will be a fascinating 12 to 24 months.

In many ways, the mandate is the economy, the economy, the economy.

It looks like that story will be front and center.

Willie pesek joining us from tokyo.

The battle over london's airports heating up.

This week the london mayor boris johnson came out and called for heathrow's demolition.

He says europe's busiest airport was not suitable because of the noise and pollution and congestion it faces.

To build a third runway in the west of london would be the wrong thing.

To build the fourth would be catastrophic.

I can't support -- i do not believe any mayor could.

On wednesday we got heathrow itself reaching its survival plan.

It says the airport should remain britain's aviation hub.

And be allowed to build one more runway.

This morning, stansed put its idea out.

Michael o'leary says that it should add one runway to gatwick and heathrow.

He joins us on the phone.

Good morning, michael.

Good morning.

How are you?

You came out with a second runway option and a four runway option that could serve 160 million passengers.

Would you support that?

I think, again, part of the problem is that, one of the problems of runway capacity is it has subject to political interference for 30 years.

Which is why we have the befuddled strategy we have.

We support three competing airports.

Thanks to the competition commission.

The best way forward credibly is to add additional runways at each of the three airports.

At one, you build on the existing infrastructure and the ground transport.

Two, we are against allowing the next runway to be gbuilt at just one airport, because then they will game the runway system -- the regulatory system.

Now that we have three competing airports, what we need to do is to facilitate the buildilng on three airports.

London suffers from a chronic runway shortage.

It's been passed out by other cities in europe, madrid, paris, and frankfurt.

The debate gets hijacked by clowns like boris johnson who have not a bum's notion about airport development or the aviation industry, but is great at solving problems in 2050, when he will be in his dotage.

I understand the argument about competition and the fact that the airport should compete and become now part of an installed infrastructure.

What should we think about moving forward?

Should we be thinking about, when it comes to your model, a single airport works.

When you think about a hub, then maybe we need more capacity at a single airport.

I fully agree.

I do not have any difficulty with do we need any more runway capacity at heathrow.

The only way to keep them honest is to have competing additional runways in gatwick which keeps the pricing down.

Otherwise you get the rewind of what the ba delivered us.

And there would be another 20 billion runway threes.

Competition is what keeps these facilities on thishonest.

There has not been a new runway in london for more than early years.

The problem with the debate is that with the davies competition --commission is another attempt to kick the can down the road.

Each airline wants to argue the case that it needs one airport.

Nobody takes the long-term view.

Clearly, the sensible long-term solution is to allow each of the three london airports to build at least one more additional runway.

That gets you three more runways.

100 million additional passenger and solves the southeast runway crisis for the next 50 years.

If they want to build a fourth one, we say, let them at it.

That is what happens in the normal marketplace.

The problem with the infrastructure problems is that it is not a normal marketplace because you get so much political interference.

Committees and commissions and study groups and high-level task forces and nothing gets done.

Ffair enough.

I suspect there are many people who would say that the reason we want to make sure we are making the right decision is because this impacts thousands of people that live under the five pass at hea -- the flight path at heathrow.

Your senses that the process is excessive.

It has been excessive for many years.

We went through a public inquiry at a second runway at stand ford.

There are lots of people that live around heathrow airport.

Welcome to the world.

The fact that you will get a third runway, it would be by a quieter aircraft.

The aircraft, the engine technology is improving.

And you live under a much quieter airport then you did 20 years ago.

Frankly, you cannot allow a couple of newbies and heathrow to stifle the development of not just aviation and tourism and job creation for the next 50 years.

That nonsense has to end.

It does not happen in france, spain or germany which is why the uk has been left behind.

It would suit ryanair to have the next runway built in standford.

Frankly, developing just one runway at the time is the wrong solution.

People who live around airports in much the same way as people who live around for all grounds, you live around them.

There are many benefits of living close to an airport, such as your property value is higher . if you do not like it, move.

Do you think, your concerns about boris's pl an are based upon economics and the ability to execute on that plan.

Which is the most serious?

The second one, the ability to implement it.

The lack of timeliness.

If you build a new airport, there is no infrastructure.

There is no railway or inner airport and the structure.

There is nothing out there.

If you look at the overspent on big-ticket punches like the olympics and.

Over budget.

You look at the high-speed rail to scotland.

It is running billions over budget and hugely delayed.

The uk is bad at delivering infrastructure because of this political dithering and lack of leadership.

The private sector has a much better delivery.

You have three airports.

You need three new runways to take care of capacity.

If you want to make five, let the market deliver them.

It is time to stand up to the couple of nimbies in heathrow who have consistently been wrong in their predictions of the end of the world and get on with living these, at least three new runways and provide london and the southeast with the infrastructure it needs to develop airport traffic amateurism, and jobs growth for the next 50 years.

Do you think costs will go down if we build previous runways?

Costs will go down if there are competing runways.

If you're only building one runway at a time and constraining capacity, then we will have more of that regulatory gaming that the caa which has been condemned as being inadequate regulator, they will get gamed.

And they will hike up the price.

Competing runways will keep prices down.

Runways would keep --excess capacity.

That will translate into more flights with quieter aircraft, more services, more consumer choice and lower prices.

Always a pleasure.

Enjoy the weekend.

Theank you.

Coming up, more on the future of london's airports.

We will debate the economic benefits of keeping heathrow open.

We will take the two sides next.

? good morning, everybody.

You are watching "the pulse" live from london.

Let's continue the conversation.

We are joined by two aviation experts with opposing views on the future of heathrow airport.

We have the aviation adviser to london mayor boris johnson.

He would like to shut down heathrow in favor of a bigger airport east of the capital.

And phil seymore wants heathrow to stay.

Michael o'leary says to build three different runways at three different airports.

There is logic to that model.

Everyone in aviation agrees that to get the maximum efficiency in the greatest benefits to passengers and the widest range of routes and frequencies, you have to havea hub airport.

Disturbing them throughout the southeast is not going to capture those benefits.

It will have less connectivity.

Every other city does the same thing.

They put their runways in one place and call it an air for.

Maybe we should learn from them.

That answer is not going to work.

We need a proper hub airport.

It cannot be at heathrow.

I remember when airbus was pushing me a-380, and it made a lot of noise about the fact of the world is going to hub and spoke model.

Suddenly all of the airlines are buying planes that were, point- to-point aces.

We do not need a hub.

Three runways will work perfectly well.

I think london is unique in terms of the concentration of people.

I do not agree with daniel.

A lot of major cities do have several airports.

Paris does.

There are options.

Berlin has three.

There is a difference between an 2-38a- 380 passenger that wants to connect somewhere else versus a ryanair who is happy to fly a short distance.

If you look at the aircraft being bought, they are point-to- point aircraft.

If people want to fly direct, yeah.

If you look at where those flights are taking place, i am not talking about just holiday flights.

Most of the airports served by the dreamliner, they have a hub at one end.

They are not flying from memphis -- to a hub airport.

They're concentrating into hubs.

The world is growing into a series of super hbus.

Ubs.

Britain is not going to have one the way things are going.

We need to be a leader in conductivity for our business and far a economy.

The problem with heathrow is that is it expired asset.

There comes a time when you need to say, that asset does not work anymore.

We need to move somewhere else if we are going to expand and grow.

The costs are enormous.

Why don't we build another westerly runway at heathrow and it gives us options of expanding all the way down?

Relocating windsor castle is the chief option.

Putting the m-25 in tunnel.

You add up the cost, not just in engineering, but the disruption of the years involved, which is what heathrow is proposing, who will pay for that?

You tell me that building a new airport on a cleared site, is going to be inexpensive option compared to that?

This is why heathrow is life expired.

They cannot break out of fix except at huge cost.

It is surrounded by people.

It is time to say goodbye.

You have done a great job.

It's time to move on and say, we are going somewhere else where we can do the job properly for britain, for businesses and for passengers and the economy.

Stansed is a piece of infrastructure that is in place.

We can bill for runways there.

It has few of the limits from a population point of view, from a spatial point of view.

But heathrow, there is already an airport on site.

They say they can deliver, i suspect there will be a few optional extras come with life at stan but they say they could do it forsed, 10 -- do it for 10 billion.

I do not think it is either/or.

I found myself agreeing with michael o'leary.

You have to look at the assets you have.

Stand sed, heathrow, and say what can you do to increase capacity?

I think the stansted option should be looked at but i do not think it should displace the other players.

Stansted validates what the mayor has been saying.

The mayor is supporting three options.

Lo and behold, standsted said they are up for it.

That might mean that that the balance of argument may move in favor of stansted.

The other two options.

One of the things with larger engineering projects is that they are very difficult to pull off on budget and on time.

You need to balance of risk and reward in the scenarios.

The risks are substantial.

And to a certain extent, unquantifiable at this stage.

The risks are substantial of attempting to build two additional runways and a sixth terminal while putting the m-25 in tunnel edit existing airport that has planes landing and taking off every 35 seconds and cannot afford a moment's delay.

That is the highest risk engineering project i have ever come across.

The cost and schedule overruns are likely to astound you.

It is a life expired asset, time to move on.

Thank you for coming in.

Now, coming up, the uk government says it will offer the world's most generous tax system for shale gas.

? welcome back.

Now, in today's new energy, the uk government says it will offer the world's most generous tax system for shale gas.

The development of shale can create thousands of jobs.

Let's talk to -- she joins us now for more on this story.

This is not about -- this is part of a consistent policy that osborne has put in place to benefit shale gas.

This is a big step forward.

This announcement will grant tax breaks to half the current rate of tax that drillers pay on potential income.

It is an attractive thing for developers, including i-gas and others.

The government is doing this to create jobs, boost security of supply, and to cut dependence on imports of oil and gas.

This announcement follows one by the government recently where it says you can pay communities living near the drilling rigs.

100,000. to compensate them for any kinds of disturbances, noise and traffic created.

It is trying to sweeten the industry, not just for developers but for residents as well.

The other thing we want to talk about is the crown estates pushing sea energy, wave power harder.

They are doing it for pieces -- is this a test?

Y this is all about costes, if it does not bring down the cost, it will fail its ambition to bring the technology on a massive industrial scale.

It is about spurring technologies that will assist technologies in installing turbines so it might include foundations, which attach the turbines to the seabed and cabling techniques.

Very nice to see you.

We're going to take a a short break.

We will see you shortly.

Plenty more to talk about in the second hour of "the pulse"." ? .. finance ministers meet in moscow.

The french prime minister says growth is returning to france but spending cuts are still needed.

European tech stocks take a hit.

Earnings keep on coming.

Google and microsoft post missing estimates.

More blues for boeing.

Urging for a beacon to be disabled on all 787's. good morning to our viewers in europe, asia and those waking up in the united states.

This is "the pulse." we are live from london.

I'm guy johnson.

G-20 central bank governors and finance ministers kick off two days worth of meetings in moscow.

They are the state of the world economy.

They include japan's policies.

Others the most programs and tax evasion.

Ryan chilcote jones is -- joins us from the capital.

To what extent is the theme of the u.s. exiting stimulus or not a concern for these g-20 ministers?

The idea that the u.s. will exit stimulus, that the federal reserve will reduce the bond buying program at some point is big for some countries.

We were talking to the korean finance minister and he said he is not -- he is concerned about the pace at which it happened.

The impact on emerging markets and exactly how the other countries in the g-20 and countries around the world are going to act together to respond to it.

Having said that, i have not heard a lot of criticism of bernanke.

The french and italian finance ministers will be they think that he is doing a good job.

The south african finance minister who back in may when he first started talking about exiting stimulus warned bernanke to make sure he does that and uses language to avoid panic and markets.

Even he was saying actually bernanke has done a pretty good job at handling the issue.

This is a market problem at this point.

The crucial challenge is how financial markets managed this and have a managed it in a way in which emerging markets are not negatively affected.

The guy that everybody wants to talk to, ben bernanke, is not even here.

He is represented by janet yellen.

She will be leading discussions when it comes to how -- what countries can expect from the u.s. down the line at some point as they exit the stimulus program.

She may be the person to talk to.

Many believe she will be the next leader of the federal reserve.

What else on the agenda?

Corporate tax dodging is a big issue in g-20 speak it is known as half it shifting or basic erosion.

Companies moving money around to avoid paying taxes.

That is a big thing.

The g-20 was to crack down on that.

They talked about that at the last meeting back in february.

The french finance minister said he thinks this year they will actually a commerce something more than just -- a commerce something more.

-- accomplish something more.

Companies are talking a u.s., germany, france, italy and great britain.

It will take some time, but we will see the end of those unjustifiable ways of evading from taxation.

In just about 25 minutes, we will speak live with the secretary-general of the oecd.

He is leading the charge.

The g-20 asked them to come up with a plan to reduce this tax dodging by corporations.

They have just done that.

They just released a plan that they want enacted over the next few years for about -- about 45 mins ago.

You will be live on bloomberg laying it out for us.

Looking forward to the conversation.

Thank you very much.

Corporate news.

Vodafone has posted a decline in the first quarter service revenue.

Good to see you.

That is your headline number.

A little better than forecast.

The forecast was 3.6%. it is a contraction and it is the fourth decline.

It is a story we have heard largely before.

The standout is not southern europe, essentially germany.

They have just reported a 5.1% drop in service, not good.

It is interesting to see what they are doing to balance all of this out.

Germany is a big market for vodafone.

Any updates on kabul gorge land -- kabel deutscheland?

They say the offer is on the table.

We may have to wait until october because that is the mother the shareholder meeting.

Clearly a key move for them.

It is an opportunity to provide the high-speed internet.

It buys you 8.5 million households.

That is what the push is all about.

Combine internet and tv's inscription into one bundle.

This will be key in the telecom space.

Given the turndown and service revenue, revenue growth will be pretty key.

Thank you, jonathan ferro.

Tech is sliding in europe.

Caroline hyde, over to you.

Let's kick it off with google.

They are getting more of us to go online and our smartphone and click on the advertisements.

They are up 23%. why are revenues not up as estimates?

Why is growth not as much as analysts have hoped for?

It is because of the move to mobile.

Every advertisement that they get you to click on, they charge less for it.

Cost per click, the amount they charge the company to advertise . the cost per click is down six percent.

Growth is slowing as we move more and more onto mobile.

The challenge for google is to come up with innovation, google glass, but it is also stick to businesses and monetize the mobile.

Mobile is a theme that runs through all of this.

You could draw a line to the story surrounding microsoft and pc sales are continuing to deteriorate as well.

They need to get on the game and move quickly.

They are.

Steve ballmer has been trying.

Last week, he was trying to reoriented his business.

Following pc sales led to a dear -- deterioration and profits.

Down 1% estimate s. pc sales slump, down 20% this year in terms of consumer pcs.

They are all c shifting to tablets and are a lot cheaper than your computer.

Microsoft is having to write down their first foray into the world of computers.

It is not just microsoft.

It is across the piece.

Sap another name in the frame as well.

Our expectations too high?

Estimates are set to rise by a similar amount, 15%. only for have reported -- four have reported in the stoxx 600. it was all about the asian slowdown.

Google, microsoft, yahoo, oracle , all missing in terms of sales.

There are signs of a theme here.

We're watching for that.

Thank you, caroline hyde.

She will be back in back in a few minutes.

We will expand on this tech theme.

What else have we got on our radar?

Treasury secretary, jack lew, says he will press his european counterparts to spur growth.

Pg 20 is taking place in moscow.

-- the g20 is taking place.

The world needs europe to grow.

More problems for boeing.

London has recommended that a begin be disabled on all -- bea con be disable by all 787's. there was a possible fuel pump problem.

Rupert murdoch told british politicians that he'd use the wrong adjective when he described the police investigation as a disgrace.

In a secretly taped recording, he said his lawyers were refusing to cooperate with the investigation.

He says he is no basis to question the confidence of the police.

Still ahead, google and microsoft missed earnings.

We will go to moscow to speak to the secretary-general.

That is coming up at 10 30 a.m. london time.

We will see you in a moment.

? welcome back to "the pulse." i'm guy johnson.

Currency markets this morning.

A critical election this weekend in japan.

A super majority which will give control moving forward from here.

This might make life harder for him.

He will have all the pieces in place in order to make his plan work.

He has got to make it work.

Let's show you what is happening with the euro dollar this morning.

We have had commentary this morning from the italian five finance minister, very upbeat.

The euro is trading at 1.3101. let's get back to tech.

Shares in microsoft and google fell last night after posting earnings that missed analyst estimates.

Microsoft missed by the biggest margin in at least a decade.

Joining us is the director of cts insights.

Caroline hyde is tracking the story.

It is difficult to make mobile work and to monetize it.

Exactly right.

There is an enormous transition going on.

Smartphones are growing at a fantastic rate.

To some extent, they're sucking the life out of the old pc market.

The growth is over here at the beaumont.

-- at the moment.

They are having to discount their tablet.

Can they compete with apple and samsung?

Google has stepped in.

It is fair to say microsoft came late and has thrown all the pieces up in the air.

Numeral versions of windows.

-- new versions.

It will take a while for the dust to settle and to see whether it is working or not.

But even google is struggling.

They're going to a multiscreen.

The fact that google is struggling probably tells us the difficulty that faces in making mobile a much more diverse economic egocosystem.

There are two things going on.

As we go to mobile, android is stunningly successful.

The advertising rates are lower.

The faster it grows, the more it deletes advertising revenues.

We are seeing people shift their browsing behavior from pcs onto mobile.

There may come a time where the pc search actually falls , which would accelerate the trend.

We think we hit that in some countries but not all countries.

Can they start charging more?

They are making it easier.

Can they start charging more?

They are adding value.

The other thing, people are doing much more obligated surgeon behaviors.

They will research -- they are doing much more complicated search behaviors.

Google's big bet is the enhanced the campaign.

They are in the progress of migrating customers.

Where does this leave apple?

They revenue models are very different.

The challenges are different as well.

Yes, apple has some advertising but it is not very strong.

It takes profits off the hardware.

That, so far -- the hardware is -- you look at the hardware story.

You have microsoft and google getting into hardware.

Motorola is coming out with a new phone.

Do we know yet which model is going to work best?

What we are significant virgins on devices and t -- apple takes most on devices.

Google is most on services and microsoft is coming into that mix.

A moving target.

We will leave it there.

Caroline, thanks to you as well.

Coming up, post-olympic games giving a boost.

That number is coming up next.

? welcome back to "the pulse." we're live on bloomberg television on bloomberg television, streaming on your tablet, your phone, and bloomberg.com.

Time for the pulse number, nine point 9 billion pounds.

That is how much the olympics boosted business since the games were held.

Investment officials said the benefit could rise to 41 billion pounds by 2020. officials say 1.4 million people play sports each weeks.

Let's get you up to speed on company news we are watching.

Vendi is it to have rejected an offer from softbank.

The offer was rejected shortly after the inquiry was made.

The credit rating was cut yesterday.

Michael dell has another week to round up votes.

He says he has no plans to sweeten the deal.

The board has pushed the shareholder vote to july 24. second-quarter profits topped analyst estimates from chipotle.

They recently started selling tofu and offering a catering service.

The german chancellor has been speaking to reporters in berlin on everything from the debt crisis to surveillance.

The annual news conference comes just before september's election.

She is still at it.

She has been on since 10:00 our time.

An hour and a half, she is been up there talking.

She has covered a lot of issues.

Her comments on greece and the potential for a greek debt write-down.

Once again, she has not absolutely shut the door on the possibility of a further haircut.

That is her word that she is using -- to greece.

She focused on the negative things that have come up about.

She said you need to look at the negative impact of a potential haircut.

She talked about how the private sector haircut for greece was a voluntary and eight gets cut would risk market turmoil.

This was clearly an issue for angela merkel.

Greece has made a lot of progress.

He said anything is on the agenda but not a subject that the german political establishment wants to be talking about right now.

David, she described the recent events in turkey as shocking.

The u.s. surveillance story is also making headlines.

She says it is not her job but she is talking about it affecting the relationship with washington.

This comes to the heart of the criticism about the angela merkel government on the issue.

She is being accused by opposition of not knowing about the priso ism operation.

They are still denying that they knew the operation was going on with the german citizens.

She enjoys using her ipad.

Thank you very much, david tweed.

Coming up, our coverage continues of the g-20 ministers meeting in moscow.

We will be live with the secretary-general.

That is coming up next here on "the pulse." you can follow me on twitter.

? top headlines.

Detroit is filing for bankruptcy, making it the largest usa to ever do so.

It has been hit by decades of decline.

The city's emergency manager says the debt is $80 billion.

Jack lu says the american economy is an example of a successful recovery.

The fiscal policy is decisive.

Our blood ago system has led to policies that have been.

We have more work to do.

-- the political system has led to policies that have been effective.

Jack lew was speaking to peter cook yesterday.

The france finance ministers that growth is returning to the french economy.

More spending cuts will still be needed.

He also spoke about the u.s. paper talk coming out of the fed.

The growth crisis that we are in -- the monetary process is important.

Also, the exit strategy.

Let's talk about the european markets.

What do we need to know?

Guy johnson, four straight weeks of gains.

.7% for the week.

It is google, microsoft, it is the tech that is dragging down sentiments in europe.

That comes across in germany.

You have sap from yesterday.

You have the taiwan semiconductor.

It is going to be tough.

You have a downgrade on sap.

That is coming through from jpmorgan.

Let's have a you -- look at the uk.

Jpmorgan said this is their topic.

-- top pick.

Another house, another change.

We have goldman sachs going to sell.

Sterling is up.

Let's return to moscow where world leaders have gathered for the g-20 finance minster's leading.

Right so-called is standing by with more.

-- ryan is standing by with more.

We are with the secretary- general of the oecd.

Based in religion -- erosion and profit shifting.

In 40 seconds, layout the plan.

. in the next two years, we will be developing 15 different actions which we think incorporate all the ways in which the company today is legally of woody to pay taxes not only because when you talk about erosion, it means the profits that are left among companies from the same corporation.

They reduce the profits.

Even those profits are shifted to low tax jurisdictions.

In the end, the result is simple.

Companies do not pay taxes or pay a modest amount of taxes.

Then the chancellor does not have any resources and they have attacked more of a middle-class.

There is a question of competition.

The company's that are paying full taxation are at a serious disadvantage because they basically pay very little taxes.

Therefore, that is an additional edge.

We try to avoid double taxation.

We ended up with non-taxation.

We have to get the pendulum somewhere in the middle, fair share.

It is not against the multinationals.

In order to make them pay their fair share -- what is different about this thing going after individual tax invaders?

This is a very import a question.

This is what makes it so difficult.

When you're going for the tax dodgers and tax havens, you are on the side of the law.

We are saying let's enforce the law.

We are trying to make multinationals pay taxes, you are basically talking about changing the regulations and change in the tax law.

Today, it is legal in order to do these profit shifting all of the world.

Good luck with that with getting 20 countries to change the laws.

No, the idea is not 20 countries about all the countries.

Good luck with that.

Give us some names of companies that are most fragrant -- flagrant offenders that are not paying taxes according to the spirit behind the tax laws.

Give us names.

I think it would be unfair and not be very illustrative.

Starbucks and google -- apple -- all of them said it is my duty to my shareholders to pay as little taxes as i can, according to the law.

The question is, what does the law allow them to do you go the law allows them not to pay taxes.

That is what has to change.

It has been estimate of that google was able to dodge about $2 billion worldwide in income tax by having its intellectual property part in be made of.

-- in bermuda.

Apple, which chose to borrow $17 billion to pay dividends rather than use the money it has its own coffers the cousin was outside of the u.s. if you repatriated that money into the u.s., you have to pay a high percentage of it in taxes.

Again, you are seeing examples of that everyday, all the time in all the companies that maximize their savings and minimize their payments of taxes . the problem is not that they are paying elsewhere, the problem is they are not paying anywhere.

Lex let me ask you, how do you fix the issue of -- analysts will say one obstacle is countries like ireland, the netherlands, luxembourg that actually facilitate some of this profit shifting.

These countries are all members of the ocd, which i run.

They have all signed up on doing -- helping us.

In the g8 with all the leaders there, the prime minister of ireland came in and said we are going to contribute to this endeavor.

We are going to play ball.

He was fully aware of the fact that perhaps maybe he was being talked about.

He was very reassuring of the people in the netherlands.

He said we understand.

The question is, how do we make sure that everybody does the same thing and that this -- that there is nowhere to hide, which is the problem that we have with individual tax dodgers.

They could simply move their accounts to the next jurisdiction.

We had 120 countries were neither of them will accept bank secrecy anymore.

The same thing we have got to do this with multinationals.

Will have to leave it there.

The secretary-general laying out a very ambitious plan to cut back on tax dodging, legal tax dodging in most cases of corporations, profit shifting, based erosion.

The plan now -- it goes to the leaders of countries.

The next time the g-20 meets in saint petersburg in early september.

Back to you.

He will have his work cut out for him.

Ryan, thank you very much.

Ryan chilcote, joining us from moscow.

In 20 minutes, and "surveillance" takes to the airwaves with tom keene.

You will talk about the chore, motown singing the blues?

-- detroit?

They have been in trouble for maybe 50 years.

There is the shock of the largest bankruptcy of a city in american history.

It was a shock last evening.

We'll have important guess that's one of them is from standard & poor's about the view forward not only for detroit but other troubled cities like chicago, like los angeles joining us today.

Guests with a lot of experience on the american economy, michael spence will join us from new york university and john scully will join us.

He is a legendary with apple computer and pepsico.

Difficult news of detroit and we will look forward to a busy week next week for economic data.

What did you make of the tech story overnight?

There is is a lot of talk of it over here.

The move to mobile is really catching everybody out.

You have seen and microsoft and also seen it and google as well.

It is a very important question.

I think in google, analysts feel strongly as part of the noise of a very successful platform.

That is not the case with microsoft.

This new tablet, the surface, i have seen exactly one in the public.

I was in miami and there was a 13-year-old girl playing with the tablet.

Other than that, i have yet to see a single surface tablet in the public.

You see the 900 million dollar runoff announced yesterday by microsoft.

I i look at those two stories as being very different.

We will have some baby news for you on monday.

The royal baby -- also golf.

My executive producer has completely forgot about bloomberg "surveillance" this morning.

He is riveted to the golf in scotland.

I have to say, i am on board with that.

I have got golf to watch.

The calendar is becoming thick.

The world's smallest trophy.

Thank you very much.

Coming up, rupert murdoch is back in the hot seat again.

He is telling politicians that he used the wrong adjective when he described the investigation into phone hacking.

That is coming up next.

We will have much more on his language.

? welcome back.

Merc k will pay $23 million to settle a lawsuit on claims it due to customers -- duped customers.

The painkiller was immensely popular before it was pulled off the market.

A battle is brewing -- time warner cable says cbs is asking for too much money to carry the network on time warner's pay-tv system.

It says in order to renew the agreement, cbs is asking for 600% more than what other affiliates receive for the same programming.

Rupert murdoch has told politicians he used the wrong adjective when he described the police investigation into phone hacking as a disgrace in a secretly taped recording.

The chairman says his words -- he will corroborate with investigators.

He now says he has no basis to question the competence of the police force.

We will have more on that story.

This is fascinating.

I have to say.

We had the testimony that he gave to parliament.

We have a tape of a meeting that was held, and he has tried to settle this.

Where are we in this process?

Two years ago in 2011, the hacking scandal exploded.

The news of the world was shut down over relations that reporters have been listening to private phone messages.

As part of the investigation around that, news corporation decided to start going through its reporters e-mails and all of its papers and hand over anything that looks suspicious to prosecutors.

We learned yesterday around half a million documents have been handed over.

What developed was large numbers of arrests to do with bribery of public officials of police and so on of paying for stories.

We have not yet had any convictions.

Let's be slightly careful.

In march, rupert murdoch met with some journalists from the sun newspaper to hear them vent their anger.

That was a private meeting, but at least one journalist taped it.

Leaked a transcript of it to the website who put up a couple of weeks ago.

In this transcript, murdoch can be seen trying to assuage very angry reporters.

These people are talking to their boss and we're still very, very angry.

He said various things to them, including that bribery was routine practice among british journalist.

Even when he bought the news of the world back in the 1960s, the safe that was full of money for bribes.

This led the committee chairman of the parliament which originally questioned him in 2011 , set would like you to come back and talk about this.

Then keith wrote and asked about specific comments that murdoch made about the police investigation.

Murdoch said that the police were bank is proportionate -- were being disproportionate and far too much effort was going into the investigation of all this.

Yesterday evening, we got his letter back which included an apology for using the wrong adjectives to describe the police investigation.

The problem with this is, we don't know what mr.

Murdoch actually thinks.

When it comes back, he is being conciliatory.

How will parliament deal with that?

He has got a bigger problem.

He is saying to them that all of this was a mistake and we should not have cooperated.

And he said that he has stopped cooperation with the police.

Even the fact that this transcript was leaked shows what a big problem he has keeping his staff happy and how unhappy a lot of them are.

Their e-mails were handed over to the police.

On the other hand, he has got issues with the wider corporate nature of news corp.. clearly, the official line that we got in the letter yesterday was no, we are cooperating with the police.

He said that news corp.

Is now going to the courts but 98% of the police requests have been agreed to.

We will leave it there.

Thank you very much.

This has become a fascinating story.

More problems for boeing.

The dreamliner fire -- last night, a boeing 787 aborted a trip to tokyo due to a possible fuel pump problem.

These beacons are on a n array of airplanes and problematic.

They are part of an aircraft required equipment.

The device in question is built by honeywell.

They build 6000 of these and this is the only incident where this has happened.

Airbus says we are not aware of ever having an incident like this on any of airplanes.

It is very, very curious why on the 787, why now

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

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