# Exclusive: Merz Warns Europe, France Enforces Curfews, Growth Defies Gravity

An episode of [Bloomberg Daybreak: Europe Edition](https://invisiblenetwork.ai/podcast/1663863397), 20 Oct 2026, 23 min.

Audio: https://podtrac.com/pts/redirect.mp3/tracking.swap.fm/track/UVBrz8bN8aM2Xe47PEPu/traffic.omny.fm/d/clips/e73c998e-6e60-432f-8610-ae210140c5b1/c1b39a51-1327-40f8-ae83-af80014e0b5c/05ea70fb-06ea-41be-aa04-b4e9005ed8f9/audio.mp3?utm_source=Podcast&in_playlist=8a433f03-1a96-430e-a3d0-af80014e0b7d

Your morning briefing. All the news you need to start your day. On today's podcast: (1) German Chancellor Friedrich Merz warned against complacency over the dangers posed by Russia, saying that President Vladimir Putin is seeking to not only defeat Ukraine, but to also undermine democracy in Europe. (2) Ukrainian officials say they suspect the US is intermittently restricting intelligence sharing despite Trump administration denials, allowing Russian projectiles to strike Ukraine without warning — including in a ballistic missile attack on Sunday. (3) French protests largely died down after authorities rolled out tougher security measures, including targeted curfews, following cost-of-living protests over the weekend that degenerated into violence, vandalism and looting. (4) Vinted, a secondhand online marketplace that counts France as one of its largest markets, has seen an influx of listings suspected to contain looted items after riots broke out across the country. (5) Shares of data-center infrastructure company Elice Inc. plunged in their trading debut, underscoring lingering concerns about whether the artificial intelligence boom can justify the billions of dollars being poured into the industry. (6) Chancellor John Healey will not increase capital gains tax in the Budget next week, in a decision that will relieve business leaders who warned ministers against such a move. Podcast Conversation: AI Tool Predicts Cancer Survival Chances With Single Face Photo See omnystudio.com/listener for privacy information.

## Transcript

[0:02] Speaker 1: Bloomberg Audio Studios, podcasts, radio, news. This is the Bloomberg
[0:11] Speaker 1: Daybreak Europe podcast. Good morning. It's Tuesday, the 20th of October.
[0:14] Speaker 1: I'm Caroline Hepke in London. Coming up today in an
[0:18] Speaker 1: exclusive Bloomberg interview, the German Chancellor Friedrich Merz warns that
[0:23] Speaker 1: Europe is underestimating the dangers from Russia. French protests die
[0:28] Speaker 1: down after curfews are enacted in Paris following violence and looting.
[0:32] Speaker 1: Plus war, interest rates and a global economy that doesn't
[0:36] Speaker 1: seem to be breaking. Why growth is holding up, but
[0:40] Speaker 1: the next downturn may be harder to fight. Let's start
[0:43] Speaker 1: with a roundup of our top stories. German Chancellor Friedrich
[0:47] Speaker 1: Merz says that many in Europe are too complacent about
[0:51] Speaker 1: the danger posed by Russia. Speaking exclusively to Bloomberg, the
[0:55] Speaker 1: leader of Europe's largest economy says that Moscow wants not
[0:59] Speaker 1: only to defeat Ukraine, but also to undermine democracy across
[1:03] Speaker 1: the region.
[1:04] Speaker 2: My biggest concern is... is the underestimated Russian impact on
[1:12] Speaker 2: our societies, which has to do with the war in Ukraine.
[1:17] Speaker 2: But this is only a part of the picture. The
[1:21] Speaker 2: big picture is that Russia is on the way to
[1:24] Speaker 2: destabilize the entire political order of our European continent. And
[1:31] Speaker 2: this is obviously underestimated by many people in my country
[1:37] Speaker 2: as well.
[1:38] Speaker 1: Merz's warning follows comments from Germany's foreign intelligence chief that
[1:42] Speaker 1: the country has become a prime adversary in a shadow
[1:46] Speaker 1: war with Russia. He also said that Germany and other non-U.S.
[1:50] Speaker 1: allies are funding Ukraine's defense without Washington's help. European leaders
[1:54] Speaker 1: are meanwhile trying to de-escalate tensions between President Zelensky and
[1:58] Speaker 1: President Trump over strikes on Russian energy targets and intelligence sharing.
[2:05] Speaker 2: I'm trying to convince Donald Trump each time I'm meeting
[2:10] Speaker 2: him that this should be in his own interest. A
[2:16] Speaker 2: stable Europe, European continent, European Union as a partner in
[2:21] Speaker 2: the world is something which is worthwhile for the Americans
[2:24] Speaker 2: as well. So they are not alone.
[2:27] Speaker 1: European leaders now face the prospect of continuing to prop
[2:30] Speaker 1: up Ukraine without America's help. For now, they're maintaining sanctions
[2:35] Speaker 1: on Moscow and insisting that Kiev shouldn't cede territory in
[2:38] Speaker 1: any peace settlement. But they also know that they can't
[2:41] Speaker 1: quickly replace U.S. air defenses or intelligence sharing as several
[2:46] Speaker 1: European capitals head into an intense electoral season. President Zelensky, meanwhile,
[2:53] Speaker 1: has again accused the U.S. of failing to provide early
[2:56] Speaker 1: warnings of Russian missile and drone attacks against Ukraine. It
[2:59] Speaker 1: comes as Ukrainian officials believe the Trump administration throttled back
[3:03] Speaker 1: intelligence sharing of a devastating barrage on Sunday. President Trump
[3:08] Speaker 1: told reporters Zelensky doesn't know what he's talking about.
[3:11] Speaker 3: Zelensky is a man that should have had this war
[3:14] Speaker 3: settled a long time ago.
[3:16] Speaker 4: If he would have listened to.
[3:17] Speaker 5: Me, he would have made a much better deal a
[3:19] Speaker 5: long time ago and have a million.
[3:21] Speaker 6: People living from his side.
[3:22] Speaker 1: And to be honest, I don't think I think.
[3:24] Speaker 7: It's time for somebody else to negotiate on behalf of Ukraine.
[3:29] Speaker 1: President Trump added, we've given a lot to Ukraine, they've
[3:33] Speaker 1: given us nothing. Zelensky is expected to meet US envoys
[3:36] Speaker 1: Jared Kushner and Steve Witkoff in Norway this week for
[3:40] Speaker 1: further talks on ending the war. Protests in France have
[3:44] Speaker 1: largely died down after authorities rolled out tighter security measures.
[3:48] Speaker 1: Last night, an 11pm curfew was put in place in
[3:52] Speaker 1: a few areas of Paris, alongside restrictions in other cities.
[3:55] Speaker 1: Our chief Europe correspondent Oliver Crook says that further measures
[3:59] Speaker 1: are expected.
[4:01] Speaker 4: We've also heard from the interior minister, the same interior
[4:04] Speaker 4: minister who handed his resignation into Emmanuel Macron over the weekend.
[4:08] Speaker 4: Macron rejected that, saying that there was going to be
[4:11] Speaker 4: more police presence in the coming weekend in order for
[4:13] Speaker 4: the government to be better prepared for the eventuality of
[4:16] Speaker 4: possible protests and indeed possible riots.
[4:19] Speaker 1: Bloomberg's Oliver Crook speaking from Paris. The action comes after
[4:23] Speaker 1: demonstrations drew more than half a million people on Saturday
[4:26] Speaker 1: across France and more than 2,000 arrests. Now, according to
[4:30] Speaker 1: research from Morningstar, the overall cost of the riots is rising,
[4:35] Speaker 1: but is predicted to remain below a billion euros. French
[4:39] Speaker 1: bonds and stocks fell on Monday and protests are likely
[4:42] Speaker 1: to extend well beyond the current week. Sticking with France,
[4:48] Speaker 1: second-hand online marketplace Vinted is taking action when it comes
[4:53] Speaker 1: to looted goods. That's as the platform sees a flood
[4:57] Speaker 1: of items suspected to contain items that are tied to
[5:01] Speaker 1: the widespread riots in France. Bloomberg's Tiwa Adebayo has more now.
[5:06] Speaker 8: France is one of Vinted's largest markets and now it's
[5:09] Speaker 8: cracking down on suspicious activity. The company says it's stepping
[5:14] Speaker 8: up monitoring after an influx of listings suspected to contain
[5:17] Speaker 8: looted items following recent unrest. Stores were targeted over the
[5:22] Speaker 8: weekend after protests over the cost of living escalated. Videos
[5:26] Speaker 8: show high-end names including Louis Vuitton and Celine being plundered.
[5:31] Speaker 8: France's Minister for AI and Digital Affairs says officials are
[5:35] Speaker 8: meeting with e-commerce firms to discuss how to handle listings
[5:38] Speaker 8: for stolen items. In London, Tiwa Adebayo, Bloomberg Radio.
[5:43] Speaker 1: South Korean data center firm Elise has plunged on the
[5:47] Speaker 1: COSDAC at its debut, falling as much as 33%. The
[5:51] Speaker 1: company raised $ 151 million in its IPO after pricing shares
[5:57] Speaker 1: at the top end of the range. Our Asia markets
[5:59] Speaker 1: reporter Avril Hong says the drop highlights growing investor caution
[6:03] Speaker 1: when it comes to bets on artificial intelligence.
[6:06] Speaker 3: This is a data center operator that's made its cost
[6:10] Speaker 3: deck trading debut and it is plunging disastrously on the
[6:14] Speaker 3: first day of school. It's just all a reminder of
[6:17] Speaker 3: investor concerns of the AI trade given borrowing costs, intense
[6:22] Speaker 3: competition concerns and how that might translate into long-term returns.
[6:28] Speaker 1: That was Avril Hong there on what is shaping up
[6:31] Speaker 1: to be the worst ever market debut for a large
[6:34] Speaker 1: Korean listing. Four founders of one of China's most promising
[6:39] Speaker 1: AI companies worked on a project with ties to the
[6:41] Speaker 1: country's main spy agency. Z.AI is seen as one of
[6:46] Speaker 1: China's AI stars, raising US $ 10 billion this year alone.
[6:50] Speaker 1: Bloomberg has linked Z.AI's top team to a body that
[6:55] Speaker 1: the UK's MI5 has warned about in an espionage alert
[7:00] Speaker 1: which came only last month. Bloomberg's UK reporter James Wilcock
[7:04] Speaker 1: has the story.
[7:06] Speaker 5: Founders at ZAI got their start working on a four-year
[7:09] Speaker 5: AI research project in 2019. That project was co-funded by
[7:14] Speaker 5: the China General Technology Research Institute, or CGTRI, according to
[7:19] Speaker 5: a report unearthed by Bloomberg. MI5 warned in late September
[7:24] Speaker 5: that CGTRI primarily funded academic research that the Chinese state
[7:29] Speaker 5: then used to improve its spying capabilities. A spokesperson for
[7:33] Speaker 5: China's embassy in the UK called the allegations from Britain's
[7:36] Speaker 5: intelligence services baseless. Yet the story highlights the risks cited
[7:41] Speaker 5: by some US officials over China's growing prowess in artificial intelligence.
[7:46] Speaker 5: In London, James Walcock, Bloomberg Radio.
[7:49] Speaker 1: Here in the UK, Chancellor John Healey is reported to
[7:52] Speaker 1: have ruled out capital gains tax increases in the budget
[7:55] Speaker 1: next week. The BBC, The Times and Financial Times newspapers
[7:59] Speaker 1: all say that the Chancellor has rejected the idea. That's
[8:02] Speaker 1: despite the tax being popular on the left. Unison's General
[8:06] Speaker 1: Secretary Andrea Egan says that there's strong public support for
[8:10] Speaker 1: raising taxes on the wealthy.
[8:12] Speaker 9: We've seen cuts, haven't we, for the last 16, 17 years.
[8:16] Speaker 9: So I think it should be something that would be
[8:19] Speaker 9: welcomed by Andy Burnham that there's a cross-party agreement that
[8:24] Speaker 9: we need more funding for better public services.
[8:27] Speaker 6: It's just common sense.
[8:30] Speaker 1: Unison's union leader, Andrea Egan, there. Ahead of the budget,
[8:33] Speaker 1: business leaders and banks have been warning that tax increases
[8:36] Speaker 1: could hit growth in the UK. Those are our top
[8:39] Speaker 1: stories for you this morning. Looking at the markets, Asia
[8:42] Speaker 1: equities tumbling, particularly the KOSPI, down by 4.3% this morning.
[8:46] Speaker 1: MSCI Asia Pacific Index dropping two-tenths of 1%. We do
[8:50] Speaker 1: have major U.S. earnings out today from Netflix, Tesla, then Meta,
[8:54] Speaker 1: IBM the following day. The Philadelphia Sox index did climb
[8:58] Speaker 1: on Monday 1.6%, so ending an eight-day losing streak. But
[9:02] Speaker 1: there are still concerns about AI, especially around that IPO
[9:06] Speaker 1: flop from a lease this morning. In terms of stock
[9:10] Speaker 1: futures for Europe, we are down 0.7% of 1% for
[9:12] Speaker 1: the US stocks, 50 futures. Bond markets, 10-year US yields
[9:15] Speaker 1: dropped two basis points at 5.11. All prices are heading higher. So,
[9:20] Speaker 1: this is Brent crude futures at $ 109. 95. I also thought
[9:23] Speaker 1: one of the most interesting stories out on the terminal today,
[9:26] Speaker 1: Eric Schmidt, his 1% anthropic stake at a conservative valuation.
[9:30] Speaker 1: could add $ 10 billion perhaps to Schmidt's existing fortune, which
[9:36] Speaker 1: is almost $ 60 billion. So, that's a very interesting story
[9:39] Speaker 1: on investments in AI. A lot of kind of back
[9:42] Speaker 1: and forth about the advantages, disadvantages of it at the moment. Now,
[9:46] Speaker 1: coming up in a moment, we're going to dig into
[9:48] Speaker 1: the details of the exclusive interview that we're bringing to
[9:51] Speaker 1: you with Friedrich Merz this morning. Plus, despite all of
[9:54] Speaker 1: the threats, the global economy remains hardy. We discuss why.
[10:00] Speaker 1: but I've got another story that has caught my eye
[10:02] Speaker 1: today and again it really is on AI artificial intelligence
[10:05] Speaker 1: researchers have built an AI tool that can predict the
[10:10] Speaker 1: survival chances for cancer patients They do it by using
[10:14] Speaker 1: a single photograph of a person's face. The scientists say
[10:17] Speaker 1: that the findings are a first. The AI tool was
[10:21] Speaker 1: trained on more than 40 million images and they included
[10:25] Speaker 1: 30,000 cancer patients. Bloomberg's Ashley Furlong has been writing about
[10:29] Speaker 1: this study that I think, you know, maybe this could be,
[10:32] Speaker 1: you know, the positive side of artificial intelligence when it
[10:34] Speaker 1: comes to global health. It's a research paper that has
[10:39] Speaker 1: been published by The Lancet. One of the authors of
[10:41] Speaker 1: the study is Raymond Mack. who is a radiation oncologist
[10:46] Speaker 1: at Mass General Brigham Cancer Institute in the US, who
[10:50] Speaker 1: says he was amazed by the accuracy of the AI.
[10:53] Speaker 1: The algorithm focuses on the bridge of the nose and
[10:56] Speaker 1: just beneath the eyes, apparently, to make its assessment work.
[11:00] Speaker 1: The tool, though, isn't ready for clinical use yet. And
[11:04] Speaker 1: can you imagine all the questions that it also raises
[11:06] Speaker 1: just because you can know, would you really want to
[11:10] Speaker 1: know your chances of survival? Would that help or not?
[11:13] Speaker 1: I think there's so much to think about and discuss,
[11:16] Speaker 1: but just the discovery of that alone is amazing. So
[11:19] Speaker 1: I'm going to put a link to it in our
[11:21] Speaker 1: podcast show notes. Let's get more now on our top story.
[11:24] Speaker 1: German Chancellor Friedrich Merz warning against underestimating Russia's Vladimir Putin,
[11:29] Speaker 1: that he is not just seeking to defeat Ukraine, but
[11:32] Speaker 1: also to undermine democracy in Europe. Francine Lacroix spoke to
[11:36] Speaker 1: Merz exclusively in Berlin. How concerned is Germany about conflict
[11:43] Speaker 1: with Russia, Francine?
[11:45] Speaker 6: Good morning, Caroline. So we had about 22 minutes to
[11:48] Speaker 6: speak to the chancellor. It's the first time this year
[11:51] Speaker 6: that we really sat down with him and we talked
[11:53] Speaker 6: about some of the things that were on his mind
[11:55] Speaker 6: and that he's really worried about. So we talked about trade.
[11:58] Speaker 6: We talked about China. We talked about investment. He's also
[12:01] Speaker 6: not doing great in the polls. But what really stood
[12:03] Speaker 6: out is that he said out of all of those things,
[12:06] Speaker 6: it's really the fact that Europe is underestimating the Russian
[12:09] Speaker 6: threat that worries him the most. Now, Again, it was
[12:12] Speaker 6: only in August where the government of Germany accused Moscow
[12:16] Speaker 6: of being behind a drone attack at an airport in
[12:19] Speaker 6: Leipzig back in the summer. And, you know, speaking to him,
[12:23] Speaker 6: I kind of realized exactly how worried he is about it.
[12:27] Speaker 6: He talked about the riots in France and how it's,
[12:30] Speaker 6: of course, linked to the cost of living, but also
[12:32] Speaker 6: the fact that these are giving rise to extreme views
[12:35] Speaker 6: either on the right or on the left. And we've
[12:38] Speaker 6: seen also a tendency amongst the right wing in Europe
[12:41] Speaker 6: to underestimate the threat from Europe. We've seen a lot
[12:45] Speaker 6: of tensions between, of course, Russia and some of the
[12:47] Speaker 6: liberal democracies, especially this week, where the chancellor also said, look,
[12:52] Speaker 6: the position of the U.S. is at the moment at
[12:55] Speaker 6: best with a big question mark, but they haven't paid
[12:58] Speaker 6: for the defense of Ukraine. So not only is he
[13:01] Speaker 6: worried about Ukraine because of Russia, but he's really worried
[13:04] Speaker 6: about our Western democracies.
[13:06] Speaker 1: Yeah, absolutely. And here is a little bit of Friedrich
[13:09] Speaker 1: Merz speaking to you about European defence, about Europe's role
[13:13] Speaker 1: within NATO.
[13:14] Speaker 2: Have a listen. We are experiencing really a new time,
[13:18] Speaker 2: which is completely different from what we experienced last decades.
[13:24] Speaker 2: And my optimism is because we are hearing the wake-up call.
[13:33] Speaker 2: And we are trying to bring ourselves into a position
[13:37] Speaker 2: which makes us strong enough for competing, for defending ourselves
[13:44] Speaker 2: independently within NATO, but on the European pillar of NATO,
[13:48] Speaker 2: which has to become much stronger than it was in
[13:51] Speaker 2: the past.
[13:53] Speaker 1: So, Friedrich Mertz speaking to Francine Lacroix on this issue
[13:57] Speaker 1: of European defence. But you also were talking to him
[14:00] Speaker 1: about the wider European outlook and this kind of sense
[14:04] Speaker 1: of economic malaise. I wanted you to talk a bit
[14:07] Speaker 1: about that. Yes.
[14:08] Speaker 6: So we also have to remember, Caroline, that, you know,
[14:11] Speaker 6: the chancellor really suffered a pretty big blow last month
[14:14] Speaker 6: after his center right, the Christian Democrats, were trounced by
[14:17] Speaker 6: the far right alternative for Germany. And this is giving
[14:21] Speaker 6: rise to speculation about his chancellorship. And so if you're
[14:24] Speaker 6: an investor, how much money do you put in Germany
[14:27] Speaker 6: right now? They're a question of large clover AI because,
[14:29] Speaker 6: of course, Europe is doesn't have any of the LLMs.
[14:32] Speaker 6: There are many questions about the protests or the riots
[14:35] Speaker 6: in France and what that means for investors longer term
[14:39] Speaker 6: and whether some of the structural concerns that we have
[14:41] Speaker 6: over Europe can be overcome. Now, the Chancellor was actually
[14:45] Speaker 6: pretty optimistic. Again, he said Europe, he thinks, has the
[14:48] Speaker 6: ability to gain strength and overcome some of the economic malaise.
[14:54] Speaker 6: He said he'll stick to his plans, he'll stick to
[14:56] Speaker 6: his term, that he'll boost investment in areas such as
[14:59] Speaker 6: artificial intelligence. We spoke to him really on the eve
[15:03] Speaker 6: of this big German investment summit. We've seen countries like
[15:06] Speaker 6: the UK do the same. We've seen also France do
[15:09] Speaker 6: the same, usually in the summer, doing a kind of like...
[15:13] Speaker 6: open court to try to get investors, especially from Wall Street,
[15:17] Speaker 6: especially some of the big AI companies. We know that
[15:19] Speaker 6: the NVIDIA chief executive was here yesterday to try and
[15:22] Speaker 6: attract investment. So he was pretty optimistic. But I think
[15:25] Speaker 6: we still need to see numbers on whether Germany can
[15:28] Speaker 6: especially be the AI kind of champion for the factory.
[15:33] Speaker 6: So this is not the good stuff like Clode or
[15:36] Speaker 6: some of the other models that we use. But if
[15:38] Speaker 6: you can integrate AI in some of the supply chains,
[15:41] Speaker 6: because it's a big manufacturing to just make it more productive.
[15:45] Speaker 1: Yeah, indeed. And this was him also talking about that
[15:49] Speaker 1: idea of kind of the economy, the uncertainty maybe that
[15:52] Speaker 1: there is in Europe. As you say, maybe AI is
[15:55] Speaker 1: the answer to some of that. But this is Friedrich
[15:57] Speaker 1: Merz speaking to Bloomberg.
[15:59] Speaker 5: This is a.
[16:01] Speaker 2: Composition of uncertainty, anxiousness, Spending money for energy, which is
[16:11] Speaker 2: assumed as being too much, as inflation rate is going up,
[16:18] Speaker 2: housing costs are growing. So people are really fearing what
[16:25] Speaker 2: is next and what comes in our future and how
[16:29] Speaker 2: can we establish our future for our kids and for
[16:32] Speaker 2: our grandchildren.
[16:34] Speaker 1: So, Friedrich Merz talking about the kind of big picture economically.
[16:38] Speaker 1: I also wonder what you think this all means for
[16:41] Speaker 1: the EU-China relationship. Germany is very much at the heart
[16:44] Speaker 1: of that. And there have been a lot of challenges,
[16:47] Speaker 1: maybe even a wake-up call for Europe, you could put
[16:50] Speaker 1: it that way, about the trade deficit between the EU
[16:53] Speaker 1: and China.
[16:55] Speaker 6: Yeah, China's a big one because we, of course, heard
[16:58] Speaker 6: EU leaders last week on this new set of powers
[17:00] Speaker 6: to counter some of the coercive trade practices that they
[17:04] Speaker 6: believe China is putting together. So this is basically a
[17:07] Speaker 6: tool that would cut off the block single market from
[17:09] Speaker 6: economic rivals such as China. I mean, it's a pretty
[17:12] Speaker 6: powerful weapon, as it were. And I asked the chancellor, look,
[17:16] Speaker 6: he was quite optimistic about China. Just in February, he
[17:18] Speaker 6: did a big trip to China. And effectively now, because
[17:22] Speaker 6: of the tit for tat, it feels like we're in
[17:24] Speaker 6: a trade war. And he really pushed back against that.
[17:27] Speaker 6: He says, I don't want a trade war with China.
[17:29] Speaker 6: We have to be very careful. And it was very
[17:33] Speaker 6: clear that we have a position on how heads of
[17:35] Speaker 6: state should react to our capacity or subsidies. But I
[17:39] Speaker 6: felt in his conversation with us that he still had
[17:42] Speaker 6: a glimmer of hope. actually, you know, China calms down
[17:45] Speaker 6: when it comes to flooding the market with some of,
[17:48] Speaker 6: for example, the hybrid models of cars in Europe and that,
[17:52] Speaker 6: you know, trade peace can be still achieved.
[17:55] Speaker 1: Okay.
[17:57] Speaker 3: Yeah, indeed.
[17:57] Speaker 1: Francine, thank you so much for speaking to us. Francine
[18:01] Speaker 1: Lacqua in Berlin there, having spoken to Friedrich Merz. And
[18:05] Speaker 1: Really taken away some very interesting points, the concerns that
[18:09] Speaker 1: the German leader has about Russia, Vladimir Putin being underestimated
[18:13] Speaker 1: by people across Europe. Stay with us. More from Bloomberg
[18:17] Speaker 1: Daybreak Europe coming up after this. Well, despite the threat
[18:23] Speaker 1: of war and of conflicts around the world, a sharp
[18:27] Speaker 1: increase in energy prices and high interest rates, the global
[18:30] Speaker 1: economy has actually remained surprisingly resilient. Joining us now to
[18:35] Speaker 1: discuss is Bloomberg Opinion columnist Daniel Moss. Daniel, good morning.
[18:39] Speaker 1: There are so many challenges, aren't they, in the world,
[18:43] Speaker 1: and particularly to economic growth. But why do you think
[18:46] Speaker 1: that the economy has stayed so robust? I mean, just
[18:48] Speaker 1: looking at the recent Chinese GDP data, for example.
[18:53] Speaker 7: I love that you began the intro with that keyword, despite.
[18:57] Speaker 7: I had actually written that down on the notebook in
[19:00] Speaker 7: front of me. Here's another one, escape. So it's not
[19:05] Speaker 7: that the global economy is going great guns. It's not
[19:10] Speaker 7: that this is some record-breaking streak that we're on here.
[19:16] Speaker 7: This is about the hurdles that the global expansion has
[19:21] Speaker 7: overcome since it began after the pandemic, or should I
[19:25] Speaker 7: say after the worst part of the pandemic. So If
[19:29] Speaker 7: you look at the latest IMF forecasts released last week,
[19:33] Speaker 7: it's really not too shabby at all. 3.1% global growth
[19:37] Speaker 7: this year, an increase, not a decrease, projected for next year. Now,
[19:44] Speaker 7: this is in spite of the relatively high inflation that
[19:48] Speaker 7: endured in the aftermath of the pandemic, in spite of
[19:52] Speaker 7: the aggressive rate hikes required to combat that, in spite
[19:57] Speaker 7: of Liberation Day, in spite of the energy price spike
[20:02] Speaker 7: generated by the Iran war. Not only are we still standing,
[20:06] Speaker 7: we might be a little bit quicker next year. Now,
[20:09] Speaker 7: just imagine... what the global economy could do without these headwinds.
[20:16] Speaker 7: So this is really, the IMF used the word resilience
[20:20] Speaker 7: a lot last week. Now, I don't want to sound
[20:22] Speaker 7: like I'm parroting their talking points, but there is something
[20:26] Speaker 7: to it. There's a hardiness to this, which these malevolent
[20:33] Speaker 7: forces have not been able to crush.
[20:37] Speaker 1: Yeah, I think that's really interesting, isn't it? And why
[20:41] Speaker 1: that might be. But in terms of the fear, though,
[20:44] Speaker 1: around a potential downturn, what are those? I mean, if
[20:50] Speaker 1: one were to come about?
[20:53] Speaker 7: Well, one will come about. It's just a question of
[20:56] Speaker 7: when and what causes it. No expansion goes on forever.
[21:02] Speaker 7: I think one of the big fears people have right
[21:05] Speaker 7: now relates to the first responders. Now, we're used to
[21:10] Speaker 7: seeing monetary and fiscal policy ride to the rescue in
[21:16] Speaker 7: varying degrees. The big concern with the rise in bond
[21:22] Speaker 7: yields recently in the advanced economies or developed economies or
[21:27] Speaker 7: high debtor economies is that the fiscal space that was
[21:31] Speaker 7: there was to respond to COVID aggressively and to a
[21:36] Speaker 7: far lesser extent, the global financial crisis. It really isn't
[21:40] Speaker 7: there right now. The capacity to borrow almost unlimited sums
[21:47] Speaker 7: of money, which existed during the pandemic, isn't there anymore.
[21:53] Speaker 7: It just isn't there. Now, I'm not calling this a
[21:55] Speaker 7: bond market crisis. In some individual countries, it could look
[22:00] Speaker 7: like that. All through the period from the GFC through COVID,
[22:07] Speaker 7: we're like, oh my God, interest rates are too low.
[22:10] Speaker 7: When is this going to normalize? When are we going
[22:12] Speaker 7: to get back to normal? Okay, now we are. We
[22:14] Speaker 7: don't like it so much, but here it is. Now,
[22:18] Speaker 7: monetary policy, I believe, will be able to respond just
[22:21] Speaker 7: as quickly as it has during past downturns. If you recall,
[22:29] Speaker 7: when COVID broke, people said, oh, well, they won't want
[22:32] Speaker 7: to go as aggressively as they did during the GFC.
[22:37] Speaker 7: Don't have the bandwidth for that. But guess what? They
[22:40] Speaker 7: responded more aggressively. So I'm pessimistic on the fiscal side,
[22:47] Speaker 7: more optimistic on the monetary side.
[22:50] Speaker 1: Or if you've got a smart speaker nearby just say
[22:52] Speaker 1: play Bloomberg Radio

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