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00:00TALK TO US ABOUT MARKET REACTION. ARE YOU CONCERNED ABOUT MARKET REACTION TODAY AND FUTURE MARKET REACTION TO SPENDING PLANS? CLAUDIO: WELL, IT IS QUITE FUNNY BECAUSE OUR SPENDING PLAN DOES NOT REFLECT COMPARED TO THE STANDARD BUDGET IN THE PAST YEARS. BY THE WAY, ITALY IS IN THE LAST LINE OF GDP GROWTH IN THE WHOLE WORLD, SO IT MEANS THERE IS A LOT OF POTENTIAL FOR THE ITALIAN ECONOMY, IF ONLY IT IS POSSIBLE TO PUSH A LITTLE BIT, THE GROWTH, WITH A LITTLE BIT OF INCENTIVE FROM THE GOVERNMENT. IF THE EUROPEAN COMMISSION THINKS THAT THE ITALIAN ECONOMY WOULD BE BETTER OFF KEEPING THE DEFICIT AT 0.8%, RAISING THE TAXES, BECAUSE THAT WAS THE PLAN, WELL, I DON ' T THINK SO. I SIMPLY THINK THAT IF THERE IS A STRUGGLING ECONOMY AND YOU KEEP ON RAISING TAXES, THE OUTCOME IS GOING TO BE MORE RECESSION. WE HAVE ALREADY SEEN THIS MOVIE. WHAT WE ARE TRYING TO DO IS A VERY STANDARD FISCAL EXPANSION MANEUVER. I FIND IT VERY STRANGE THAT THIS IS CONSIDERED SUCH A REVOLUTIONARY MOVE. TOM: -- FRANCINE: I THINK THE MARKETS ARE A LITTLE WORRIED ABOUT WHAT YOU SAID ABOUT THE EURO. ARE THE FISCAL TARGETS AND ATTEMPTS TO GET ITALY OUT OF THE EURO OR OUT OF THE EUROPEAN UNION? CLAUDIO: THIS IS VERY STRANGE. YOU KNOW VERY WELL I HAVE BEEN A VERY VOCAL SUPPORTER OF THE FACT THAT ITALY IS GOING TO BE BETTER OFF IN THE UNION, BUT THERE IS NO PLAN FOR LEAVING THE EURO WITHIN THIS GOVERNMENT. I KNOW THAT SOMETIMES , YOU KNOW, YOU LOOK AT IT AND PIECES -- BITS AND PIECES TO MAKE A STATEMENT THAT CAN ROCK THE MARKET, BUT THE VERY FACT THAT THE MARKET IS SO VOLATILE, THAT IT IS ENOUGH TO TAKE MY WORD OF SOMETHING THAT I SAID THOUSANDS OF TIMES AND IT DOES NOT IMPLY AT ALL THAT WE ARE PLANNING TO LEAVE THE EURO TO UNDERSTAND THE ACTUAL SITUATION THAT IS VERY FRAGILE. IT IS POSSIBLE PROBABLY TO ADDRESS IN A VERY SENSIBLE WAY BECAUSE WE ARE CONSIDERING IN EUROZONE THAT THE DEBT AFTER THE QE ENDING, THE DEBT IS A PROBLEM. THE CENTRAL BANK IS NOT GUARANTEEING THE DEBT OF ANY EUROPEAN COUNTRY. THIS IS A PROBLEM FOR ME. THE SOLUTION IN MY OPINION IS GOING TO BE THAT THE CENTRAL BANK SHOULD FIND A FIXED NUMBER OF DATA POINTS AND INTERVENE TO CURB IF IT GOES BEYOND THAT LEVEL. IF NOT, YOU CAN ROCK THE MARKET IN A WAY THAT IS NOT SENSIBLE IN A WAY THAT SHOULD BE STABLE. FRANCINE: WHAT CAN YOU DO TO REASSURE THE MARKETS? IF THE BUDGET TARGET OF 2.4% THIS JUST THE START, YOU WILL SPEND MORE TO DELIVER THE PROMISES THAT YOU DID DURING THE CAMPAIGN? CLAUDIO: WELL, 2.4% OF A BUDGET DEFICIT IS NOT SOMETHING THAT IS TO BE CONSIDERED SUCH A REVOLUTIONARY MOVE. FRANCE IS DOING 2.8%. SPAIN IS DOING 2.8%. IN TERMS OF MACRO VALUES, THEY ARE WORSE OFF THAN ITALY. WE HAVE A PRIMARY SURPLUS BUDGET. WE HAVE A TRADE SURPLUS. WE ARE NOT IN NEED OF CAPITAL. I DON ' T UNDERSTAND WHAT IS THE DIFFERENCE FROM US TO FRANCE AND WE HAVE BEEN MUCH MORE CAUTIOUS THAN FRANCE IN THE LAST 10 YEARS IF YOU SEE THE NUMBERS OF THE DEFICIT. WE ARE STILL MORE CAUTIOUS THAN FRANCE, SO I DON ' T SEE WHAT IS THE DIFFERENCE BETWEEN US AND THEM. FRANCINE: BUT, IF YOU WERE FACING A SITUATION WHERE YOU EITHER HAD TO CHANGE THE 2.4% TARGET TO MAKE IT HIGHER OR CUT YOUR PROGRAMS TO MEET THE 2.4% TARGET, WHAT WOULD YOU CHOOSE? CLAUDIO: WELL, IF WE DECIDED THAT WE ARE KEEPING A NUMBER, THEN WE ARE WORKING TOGETHER TO STICK TO THIS NUMBER. OUR PROGRAM AND WE ARE GOING TO DELIVER OUR PROGRAM, IT IS A FIVE-YEAR PROGRAM. SO, WE HAVE A LOT OF TIME TO DEVELOP WHAT WE PLAN TO DO AND WHAT WE PROMISED TO OUR STAKEHOLDERS TO DO. BUT, OF COURSE, WE ARE NOT MAD. WE ARE NOT NICOLAS MADURO AND VENEZUELA OR SOMETHING LIKE THIS. WE KNOW WE ARE IN THE COMMON CURRENCY. IT IS GOING TO BE NOT USEFUL TO EXCEED IN THE DEFICIT BECAUSE, IF NOT, WE ARE GOING TO SHIFT BACK TO A TRADE DEFICIT AND THAT IS NOT SOMETHING THAT WE WANT TO DO. SO, WE ARE GOING TO STICK TO THE NUMBERS. IF WE HAVE TO DELAY OUR ELECTORAL PROGRAM, WE ARE GOING TO DO IT IN A FIVE-YOUR TIME SPENT. FRANCINE: SO, YOU ARE TELLING ME, MR. BOR GHI, AND THERE ARE A LOT OF INVESTORS WATCHING US, THAT YOU WON ' T BREAK YOUR 2.4% TARGET EVEN OF GROWTH FALLS SHORT OF EXPECTATIONS. CLAUDIO: YES, BECAUSE WE DID NOT SAY 2.4% BECAUSE WE SIMPLY PICKED THE NUMBER OUT OF THE BAG. WE THOUGHT THAT THIS NUMBER IS ENOUGH TO START THE REFORM PROGRAM AND THE ELECTORAL PLEDGE THAT WE DID WITH OUR ELECTOR WITHOUT ENDANGERING THE NUMBERS. AND I CAN TELL YOU THAT THESE NUMBERS, THE DEBT TO GDP IS GOING TO SHRINK, THAT IS SOMETHING THAT THE INVESTORS SHOULD CARE ABOUT. WE HAVE SEEN WHAT HAPPENS WHEN YOU GO TOO FAR WITH THIS TYPE OF CONSOLIDATION. 13 QUARTERS OF RECESSION AND THE DEBT TO GDP SPIKED UP. WE ARE GOING TO DO SOMETHING MORE SENSIBLE IN TERMS OF THE ECONOMY. FRANCINE: WAS THE FINANCE MINISTER READY TO QUIT AND DID SOMEONE HAVE TO PERSUADE HIM TO STAY ON? CLAUDIO: NO, I DON ' T THINK SO. HE IS A VERY GOOD TECHNICIAN AND HE HAS PERSONAL SKILLS IN TERMS OF DEVELOPING A STRATEGY FOR THE PUBLIC-SECTOR EFFICIENCY OF SPENDING. SO, I ' M SURE HE IS GOING TO STAY IN PLACE. THERE HAS BEEN A LITTLE BIT OF MISTAKE IN COMMUNICATION. HE IS A TECHNICIAN. HE NEVER DID ANY TYPE OF POLITICS. PROBABLY THAT WAS THE PART THAT WAS NOT SO CLEAR. SOME POLITICAL STAKEHOLDERS OF THE GOVERNMENT CAN CREATE URGING BEYOND WHAT A PURE TECHNICIAN CAN DO. FRANCINE: HOW SATISFIED DO YOU THINK THE GOVERNMENT ' S WITH THE WORK OF THE FINANCE MINISTER AND COULD HE QUIT AFTER PARLIAMENT APPROVES THE BUDGET? CLAUDIO: IT IS REALLY TOO EARLY TO SAY. WE JUST STARTED. I MEAN, ONE CAN THINK THAT A MONTH IS A LOT OF TIME, BUT STEPPING INTO A CABINET WHERE THERE WAS NO ONE WHO CAME IN FROM THE PREVIOUS GOVERNMENT, IT IS BARELY ENOUGH TO START TO MAKE RECOGNITION OF WHERE WE WERE. FOR ANYONE OF US, ME INCLUDED. IT IS A LITTLE BIT TOO EARLY TO THROW IN A DOCUMENT TO SAY WHETHER WE ARE GOOD OR NOT. FRANCINE: ARE YOU CONCERNED THE EUROPEAN COMMISSION COULD REJECT THE BUDGET? ARE YOU CONCERNED THAT THE PRESIDENT COULD SEND THE BUDGET LAW BACK TO PARLIAMENT? CLAUDIO: WELL , FOR THE SECOND OPINION, I DON ' T THINK SO. WE ARE COMING FROM SIX YEARS WHERE THE BUDGET WAS AROUND THIS LEVEL OR HIGHER. REGARDING THE COMMISSION , IT IS A GOOD QUESTION. WE HAVE TO KNOW IF THE COMMISSION IS INTERESTED IN THE GROWTH OF ITALY, OR IF THEY ARE INTERESTED IN THE RULE. IF THEY ARE ONLY INTERESTED IN THE RULE, REGARDLESS OF WHAT IS GOOD FOR THE ECONOMY OF ITALY, THEN PROBABLY THAT RULE SHOULD BE EXPLAINED A LITTLE BIT BETTER. I ' VE HEARD THAT THE LIMIT OF THE DEBT WAS 60%. AND IF THEY ARE BEYOND, THERE IS NO DIFFERENCE BETWEEN A COUNTRY THAT HAS 100% LIKE FRANCE OR SPAIN AND ANOTHER ONE THAT HAS 130%. IT IS HIGHER, BUT THE RULE SHOULD BE THAT FOR ANYONE. FRANCINE: A FINAL QUESTION ON THE EURO. WITH THE CAMPAIGN PROMISES TAKE CENTER STAGE? CLAUDIO: AS I TOLD YOU, IT IS QUITE DIFFERENT BETWEEN BEING CONVINCED THAT ITALY IS GOING TO BE BETTER OFF. GETTING OUT REQUIRES AT LEAST A COORDINATED IDEA. DOING SOMETHING UNILATERALLY AT THE MOMENT IS UNTHINKABLE. IF EVER THERE IS ANY KIND OF EUROPEAN PLAN , WE ARE GOING TO DISCUSS. THE SUBJECT OF GETTING OUT OF THE EURO UNILATERALLY IS OFF THE TABLE. FRANCINE: CLAUDIO BORGHI , THANK YOU SO MUCH, THE HEAD OF THE ITALIAN HEAD OF LOWER HOUSE BUDGET COMMITTEE. I HOPE THIS IS ONE OF MANY INTERVIEWS HE WILL GIVE TO BLOOMBERG. THAT STOCK MARKETS. BANKS, A LITTLE BUT ON THE LOWER SIDE. LET ' S BRING UP THE BOARD FOR YOU. THE FTSE MOVED DOWN FROM 1.2%. WE WERE TRACING SOME OF THE FALSE AS WE WERE SPEAKING TO MR. BORGHI. PRESIDENT TRUMP HAS FAILED THE NORTH AMERICAN TRADE DEAL AS A BIGWI -- BIG WIN. TRUMP SAYS MEXICO AND CANADA ARE NOW WONDERFUL PARTNERS. PRESIDENT TRUMP: IT IS THE LARGEST TRADE DEAL THE UNITED STATES HAS EVER NEGOTIATED AND IT IS ALSO A GREAT DEAL FOR OUR COUNTRY. IT IS GOING TO PRODUCE JOBS AND COUNTRIES ARE NOT GOING TO BE LEAVING AND FIRING EVERYBODY AND MAKING PRODUCTS AND SENDING IT BACK INTO THE UNITED STATES NO TAX. [CHEERS] PRESIDENT TRUMP: IT IS FAIR, IT IS MODERN, IT IS BALANCED. AND WE HAVE TWO WONDERFUL PARTNERS. NOW THEY ARE PARTNERS. MEXICO AND CANADA. THAT IS A GOOD THING. FRANCINE: THE INTERNATIONAL MONETARY FUND IS SET TO CUT ITS FORECAST FOR GLOBAL GROWTH SEEING THE TRADE WAR IS DARKENING THE OUTLOOK. CHRISTINE LAGARDE SAYS SHE IS NO LONGER SO OPTIMISTIC. LAGARDE -- MADAME LAGARDE: SIX MONTHS AGO, I POINTED TO CLOUDS OF RISK ON THE HORIZON. WELL, IT IS NOT POURING, BUT THERE IS A BIT OF A DRIZZLE. BECAUSE TODAY, SOME OF THE RISKS HAVE BEGUN TO MATERIALIZE. AND, INDEED, THERE ARE SIGNS THAT GROWTH HAS PLATEAUED. FRANCINE: STILL WITH US , THANOS, THANK YOU FOR YOUR PATIENCE TODAY. WE HAVE A LOT OF NEWSMAKERS AROUND THE WORLD. WHEN YOU LOOK AT THE IMF AND FORECASTS OF WORLD GROWTH, OUR TRADE PRESSURES DEFLATIONARY OR INFLATIONARY FOR THE WORLD? THANOS: THAT IS CRITICAL. INFLATION IS GOING TO BE THE KEY CONCERN FOR ME RATHER THAN TRADE IN 2019. TO THINK THAT TRADE FRICTIONS WILL CONTINUE, WE HAVE A WAY OF SEEING HOW THIS COULD BE OPERATED BY THE BILATERAL PROCESSES. MY CONCERN IS ON THE INFLATIONARY SIDE THROUGH MORE OFFICIAL -- FISCAL EXPANSIONARY POLICIES TO AVERT POPULIST MEASURES TO DEAL WITH DISCREPANCIES BETWEEN THOSE WHO ARE BETTER WELL-OFF AND THOSE LIKING BEHIND WITH A LOT OF THE -- LAGGING BEHIND. FRANCINE: IS CHINA THE BIGGEST RISK OR IS IT SHADOW BANKING? THANOS: I THINK THE CHINESE HAVE BEEN DEALING WITH SHADOW BANKING. THEY CAN DEAL WITH THE TRADE WAR. CHINA COULD POTENTIALLY WIN A TRADE WAR VERSUS THE U.S. BECAUSE IT IS A MEDIUM TO LONG-TERM STRATEGY. MR. TRUMP A GIVEN AMOUNT OF TIME, PRESIDENT XI CAN TAKE AS MUCH TIME AS NECESSARY. AND HE CAN CHANNEL THE ECONOMIC GROWTH ACCORDINGLY TO THE OTHER SECTORS WITHIN THE ECONOMY. FRANCINE: IS THERE A DANGER THAT CHINA BECOMES MUCH MORE INWARD LOOKING? BECAUSE THEY ARE DEALING WITH GDP THAT THEY NEED TO STIMULATE, THAT DOES NOT GIVE THE SUPPORT TO THE EMERGING MARKETS AROUND THEM. THANOS: ON THE CONTRARY, I WOULD SAY THAT CHINA IS BEING MUCH MORE OPEN INTERNATIONALLY AND THEY ARE MUCH MORE KEEN TO CREATE A STRONGER TERMS AND TRADES. WE HAVE SEEN IT WITH RUSSIA AND JAPAN. I THINK KEY WITH GERMANY. I THINK CHINA IS COMING OUT, RATHER THAN BEING MORE INWARD FACING WITH THIS. FRANCINE: BUT HOW DO THEY DO WITH IMBALANCES BACK HIM? THANOS: I THINK THEY ARE DEALING WITH THEM. THERE WILL BE A LITTLE BIT OF A SLOWDOWN WITH GROWTH. JUST SIGNIFICANT. I THINK THERE IS A 20% PROBABILITY OF INFLATION IN THE U.S. I THINK THERE IS A 0% PROBABILITY OF INFLATION IN THE EU. TOM: THANK YOU SO MUCH -- FRANCINE: THANOS, THANK YOU SO MUCH. JEREMY HAD JOINS US FROM THE -- HUNT JOINS US FROM THE TORY PARTY CONFERENCE. THIS IS BLOOMBERG. ♪ FRANCINE: THIS IS " BLOOMBERG SURVEILLANCE, " FROM LONDON. LET ' S GET STRAIGHT BACK TO ANNA EDWARDS AT THE TORY PARTY CONFERENCE. ANNA: FRANCINE, THANK YOU VERY MUCH. I ' M PLEASED TO SAY I ' M JOINED BY JEREMY HUNT , THE UK ' S FOREIGN SECRETARY. FOREIGN SECRETARY, AND -- VERY GOOD TO HAVE YOU WITH US. DO YOU REGRET COMPARING THE EUROPEAN UNION TO THE SOVIET UNION? JEREMY: GOOD MORNING. I THINK IF YOU READ THE SPEECH PROPERLY, YOU CAN SEE THAT I WAS NOT SAYING THE EU WAS LIKE THE SOVIET UNION. I ' M SAYING IT IS SET UP TO COUNTER THE SOVIET UNION, BUT THEY ' VE GOT TO BE VERY CAREFUL THAT THEY ARE NEGOTIATING FROM THE APPROACH, IF THEY REALLY THINK THAT THE ONLY OUTCOME THAT IS EXCEPTIONAL FROM THESE TALKS IS TO PUNISH BRITAIN FOR WANTING TO LEAVE THE CLUB, THAN THAT IS NOT CONSISTENT WITH EUROPEAN IDEALS AND WE SHOULD REMEMBER WHY WE WERE SET UP BECAUSE THERE WERE ORGANIZATIONS THAT DID TAKE THAT APPROACH. ANNA: DO YOU THINK IT WOULD BE HELPFUL TO MAKE THAT KIND OF COMPARISON WHEN GETTING A BREXIT DEAL? BECAUSE IT HAS ANGERED SOME POLITICIANS IN EUROPE. SEC. HUNT: I THINK THEY NEED TO UNDERSTAND THAT WE ARE VERY ANGRY, AS WELL. IF THE EU ' S VIEW THAT EVERY TIME WE PUT CONSTRUCTIVE PROPOSALS ON THE TABLE ALL THEY HAVE TO DO IS TO SAY NO, COME BACK WITH SOMETHING DIFFERENT, THEN THAT IS NOT A NEGOTIATION. THE POINT I WAS MAKING IN MY SPEECH IS THAT THE EXTRAORDINARY SUCCESS THAT WE HAVE SEEN IN EUROPE, THE PEACE AND PROSPERITY SINCE 1945, HAS BEEN BECAUSE THERE HAS BEEN A PARTNERSHIP AND A FRIENDSHIP BETWEEN THE U.K. AND CONTINENTAL EUROPE AND WE NEED TO MAKE SURE THAT CONTINUES. ANNA: IT WAS NOT DIPLOMATIC LANGUAGE, ARGUABLY AND SOME DIPLOMATS HAVE MADE THAT POINT, IS THAT SOMETHING YOU FEEL YOU NEED TO USE TO CONVINCE THE AUDIENCE? SEC. HUNT: I WOULD SAY WAS A VERY DIPLOMATIC ARGUMENT. WHAT I WAS SAYING IS THAT OUR FUTURE IN EUROPE, BECAUSE BURTON IS NOT LEAVING EUROPE, WE ARE LEAVING THE EU, BUT OUR FUTURE IN EUROPE WILL BE MORE SECURE, MORE SAFE, MORE PROSPEROUS, IF BRITAIN AND THE EU ARE FRIENDS, AND THAT IS A DIPLOMATIC ARGUMENT, WHICH I THINK I PUT FORWARD A GREAT DEAL OF PASSION AND I THINK IT GOT A LOT OF RESPONSE FROM THE WHOLE, AND I THINK THAT IS WHAT BRITAIN WANTS. PEOPLE WANT TO LEAVE THE EU, BUT THEY WANT TO STAY FRIENDS WITH EU COUNTRIES. THEY DON ' T WANT TO THROW THE BABY OUT WITH THE BATHWATER. THE THING THAT HAS BEEN SO IMPORTANT TO KEEPING THE PEACE OVER THE PAST 65 YEARS IS THAT THE U.K. HAS HELPED DEFEND THE BORDERS OF THE EU, AND LET ' S KEEP THE GOOD THINGS ABOUT THAT RELATIONSHIP. ANNA: WE HAVE BEEN REPORTING THAT THE GOVERNMENT IS GOING TO GO TO EUROPE WITH A NEW PROPOSAL ON THE IRISH BORDER. IS THE PLAN THAT THERESA MAY IS PLANNING -- PLANNING TO TAKE TO BRUSSELS ALREADY DEAD WITHOUT EITHER SUPPORT? SEC. HUNT: I HAVE NOT SEEN THE PLAN. ALL I CAN SAY WITH TOTAL CERTAINTY IS THAT THERESA MAY WILL NOT AGREE TO A DEAL WHICH PUT THE BORDER DOWN THE IRISH SEA, BECAUSE NO PRIME MINISTER -- ANNA: NO CHECKS? SEC. HUNT: SHE WOULD NOT AGREE TO THE U.K. ' S BORDER BEING DOWN THE IRISH SEE BECAUSE THAT WOULD BE TO GIVE UP SOVEREIGNTY OF PARTS OF THE UNITED KINGDOM. ANNA: THANK YOU SO MUCH. FRANCINE? FRANCINE: THANK YOU SO MUCH. " BLOOMBERG SURVEILLANCE " CONTINUES. WE WILL GO BACK TO THE TORY PARTY CONFERENCE. TOM KEENE JOINS ME OUT OF NEW YORK. ♪ FRANCINE: ITALIAN ASSETS SUFFER A FRESH BLOW. OIL NEAR A FOUR-YEAR HIGH. DROP IN EXPORTS FROM IRAN AND

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DUP's Foster Says Border in Irish Sea is 'Our One Red Line'

U.K. Democratic Unionist Party Leader Arlene Foster discusses the Irish border issue as part of Brexit negotiations. She speaks with Bloomberg's Anna Edwards at the U.K. Conservative Party Conference in Birmingham on "Bloomberg Surveillance." (Source: Bloomberg)

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