Russia Eyes Europe Sabotage, US Borrowing Costs Surge, Stock-Shy Europeans

0:02 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg Daybreak Europe podcast. Good morning, It's Thursday, the thirteenth of August. I'm Stephen Carroll in London. Coming up today, European officials warren Russia may step up hybrid attacks as Germany strengthens its intelligence powers. US long term dead costs climb to levels not seen since the global financial crisis, plus cash rich and stock shy. We look at efforts to persuade Europe's cautious savers to embrace investing and help finance growth across the continent. Let's start with a roundup of our top stories. Intelligence officials are warning of a potential escalation in Russia's shadow war against NATO countries in Europe. It's

0:48 been seen as another step in Moscow's campaign to intimidate countries that are supporting Ukraine. Bloomberg cywhen pots has more.

0:55 Russian intelligence and security services are said to be considering operations, including infrastructure sabotage or false flag attacks on countries in Central and Eastern Europe. That's the warning from a European intelligence official who's spoken to Bloomberg. But officials say there are no signs Moscow is preparing a conventional attack or invasion.

1:16 They say Russia could instead be trying to sow fear by making Europe believe and escalation is coming. In London, I'm you and pots Bloomberg Radio.

1:25 The threat of hybrid attacks comes as Germany warns of a Russia linked influence campaign ahead of regional elections in the country next month. Chancellor Friedrich Marxu's cabinet has also approved sweeping new powers allowing German intelligence agencies to more actively disrupt foreign threats. The Chancellor's chief of staff, Nina Warkan, says Germany is constantly being targeted by hybrid attacks.

1:49 Democratiz our country and our democracy are threatened to an extent we could not have imagined until recently. Germany is now constantly the target of hybrid attacks by foreign power, and this is a real and very acute danger. It is a threat to our free society, our understanding of values, our security and thus precisely what constitutes the foundation of our country. So far, it must be objectively noted we have relied too much on our partners to ensure our security in many security relevant areas.

2:21 You know, WORKO with speaking as Germany's domestic security agency said the Russia linked campaign is using AI generated content and dummy social media accounts to deepen social division and undermine trust and democracy. Interior Minister Alexander Dobrin says the security threat requires a new era for German intelligence services TAD and Annoyer.

2:43 Indeed, a new era is beginning for the intelligence services. Ladies and gentlemen. We are facing a new threat. We are confronted with a serious threat situation on a daily basis. We are daily targets of hybrid warfare. We are daily targets of espionage, sabotage, cyber attacks and covert sections by foreign powers aiming to destabilize Germany, to harm our country and to bring about political and social changes within our nation.

3:14 That's alex Ader Dobrain speaking through a translator. Under draft legislation seen by Bloomberg, Germany's intelligence agencies would be given new powers, including the ability to hack IT infrastructure during a cyber attack and access telecommunications and digital services systems. US government borrowing costs at auction have climbed to their highest level since the global financial crisis, as investors demand better returns for buying its debt sale of Bwentchmark ten year treasuries yesterday produced the highest yield since two thousand and seven, though demand held up reasonably well. Attention now turns to today's thirty year treasury auction, which is expected to carry the highest financing rate in twenty five years.

3:57 Persistent inflation and swelling budget deficits are add to the pressure, alongside rising oil prices and competition from corporate debt sales. Japan's government is backing the prospect of another Bank of Japan interest rate hike in the coming months. Bloomberg understands the next move is likely in September or October, as officials seek to counter persistent weakness in the yen. The currency's decline is adding to inflation and squeezing households, while the impact of the recent joint US Japan intervention is already fading. Another increase with mark the boj's fastest pace of tightening in a twelve month period since nineteen eighty nine.

4:37 US President Donald Trump is reverting to economic sanctions on Iran. The approach, dubbed maximum pressure, comes as analyst question whether the measures will spark meaningful political change. Bloombergs Tyler Kendall says, we're a long way from a resolution.

4:54 It's very evident that both sides are trying to dig in to their positions when it comes to the street or removes the little sign that Roan is going to give up the leverage it has when it comes to the waterway, not just in terms of its grip on shipping in her moves, but also importantly we should point out the other disruptions to global shipping as Earlier today, Yemen's government confirmed that at least six people died in a Houthi attack in the Red Sea, marking the first such fatalities of a Houthi attack since this specific conflict has started.

5:26 Our White House correspondent Tyler Candle, speaking their President Trump's administration is relying on a steady increase in sanctions in a naval blockade to stifle oil exports. Asked for comment on the new approach, a White House officials said the strategy had left Iron completely broke and that Trump has many levers that he can pull in the coming months.

5:45 Europe's fifth heat wave of the summer is set to peak today as temperatures continue to break records. Both London and Paris are expected to see temperatures of thirty seven degrees celsius. With the UK on track for its hottest ever summer, Prime Ministrategy of US asked the public to help where they can.

6:02 We would ask people to check out the advice on the NHS app, particularly about the importance of staying hydrated, and the advice would be to check in on elderly friends and relatives who may need support at this particular moment in time.

6:19 Andy Burnham's government is now openly talking of planning for annual summer pressures as the heat strains emergency services. London's ambulance crews have been fielding more calls than at the height of the COVID nineteen pandemic, and private chat groups in China are reportedly selling gossip on which officials might be sacked next. The story in a state backed magazine comes as president cheating pain continues is sweeping anti corruption crackdown.

6:43 Bloombergs Rebecca Chung Wilkins says it points to a demand generated in part by the political system's own secrecy.

6:50 Up was of nine hundred thousand countreys that were probed last year, need two hundred of them right by in central governments and more senior officials class. When officials are pro there is also typically an investigation that's linked to a variety of companies that maybe will to lead to that if official as well.

7:09 Chim Wilkins notes the crackdown comes as China heads towards its five year leadership Congress, with President she looking to secure a precedent defying fourth term. Blueberg News couldn't access the chat groups or independently verify the reports. Those are your top stories in the program. On the markets this morning, Eurostock's fifty futures up by four tenths of one percent, THEMSCIL Country World Index up by two tenths of one percent.

7:31 We do have global stocks close to record highs. The Mscirish specific indexes up by one point one percent, the cost B and cell four point two percent higher. Now, oil prices a little lower, Brankers down by a tenth of one percent at eighty eight dollars and eighty nine cents on the ten year treasury yielders down by two basis points at four point six eight percent. In a moment, we'll bring you more on those warnings of new threats from Russia plus how can European savers be encouraged to invest in stocks and bonds instead. But another story that we've been reading this morning on China's microdramas going global.

8:08 Christopher Beam has been writing about this. If you're not familiar with the format, think soap operas meets TikTok. They're in between one and three minutes long, and each series comes in fifty plus episodes. They cover themes like romance, betrayals, hidden secrets, and what Christopher describes as near constant slapping.

8:25 Popular subject matter include mafia stories, werewolves, and billionaires plus the occasional Werewolf billionaire micro dramas originated in China in the twenty tens. Christopher reports are the big Hollywood names like Disney, Fox, and Paramount Plus are all exploring the format. Annual revenue from microdramas reached more than nine billion dollars in China last year, surpassing to the domestic box office, according to Media Partners Ager. Another media consultancy says that outside of China, the industry pulled in three billion dollars last year. So perhaps not surprising that we are seeing so much interest from a global industry now.

8:59 It's developed at pace.

9:00 There's been reports and it's included in Christopher's piece of difficult or even dangerous working conditions from actors involved in these productions. But there's also some of the big challenges that these this kind of media is facing AI for example, and also going to be able to pay for this product too. And actually some traditional soap operas are perhaps providing lessons for how things could develop from micro damas.

9:24 Really interesting piece from Christopher being will put a link to it in our podcast show notes. Let's bring you more now on those warnings that Russia may escalate attacks against other European countries, particularly in the Baltic region. This is Germany's domestic security agency warned of a Russia linked to influence campaign head of regional elections next month. Our chief year of correspondent, Oliver Krupp joins us now from Germany from More this morning. Oliver, what more can you tell us about these warnings of Russian attacks?

9:50 So listen, we tend to get these warnings from time to time from a number of different people. We've heard it from the Prime Minister of Poland over the last couple of weeks, who was really suggesting that this is going to be kind of a critical few months for Poland, for the Baltic nation. He didn't really expand on really he meant for that, but it was a pretty dire warning, and some of the sort of Baltic foreign ministers and defense ministers that I've spoken to you over the last couple of weeks and months, you know, said, in terms of the actual impact and the things that they've been seeing from the Russians, there hasn't been a massive augmentation yet.

10:20 They are dealing with obviously the sort of perennial issues Latvia for example, some of these sort of balloons that come over from Belarus. Of course, also migrants have been weaponized at the border, those kinds of things. Those have been sort of permanent threats. But I think the broader context here is sort of important. With all of these attacks that we're seeing that are landing to much damaging effect, and the Russians, whether it's the refining operations, whether it's these ports in the Black Sea, the Russians are under serious pressure and so there's a real question in terms of what retaliation from the Russians are going to look like. Obviously, they've been bombing the Ukrainians very aggressively over the last

10:55 couple of months. But there is some question now with that desperation, with the impact that's having on the Russian CoCom me, will they expand it further. So that's the warning we've been getting, obviously from the Baltic nations. We're hearing similar warnings also from the Germans who have been sort of upping the rhetoric about that, and of course, as you mentioned there, Stephen, also preparing for their own issues with their sort of state elections coming over the next couple of months, where they're seeing a huge amount of division.

11:16 Yeah, I mean, what tell us more about this concern over a campaign linked to these elections as well? I mean, what do we know about that threat and how is Germany planning to respond?

11:30 Yeah, So again, the broader picture here is that for this government, which is intensely unpopular. This is a government led by Friedrich Martz, who is a very unpopular politician in his own right. And of course, now according to the opinion polls across Germany, the CDU is not even the first party anymore, is of course the AfD the Alternative for deutsch Land, that far right wing party but of course they have a much more sort of sympathetic view of Russia. But more important potentially to the Russians is they have a very sort of negative and very critical view of Ukraine. You'll remember that some of these lawmakers were the ones that called Zelenski when he came in and spoke before the Bundestag. So of course any

12:03 sort of support for them would be seen as a very positive thing by the Russians. And what we're expecting now over the next couple of months the next state election we're going to have on September the sixth, that is in zachsen Anhalt. This is one of these regions within Germany where the AfD may actually get a full out majority. That would mean that the AfD would be in a governing position for the very first time since the party came into existence. You know, they've won the number one seat in some other East German states, but it was never enough votes to actually govern. So this is obviously a very critical election for the Germans, but of course for the Russians. So there's a lot of concern about social media in what ways they're able to

12:40 sort of amplify a division, and we should say it doesn't need that much help. This is a nation that is already intensely divided, particularly in the economic weaker part of Germany, the east of Germany, where you see that surging support for.

12:52 The AfD Okay, Oliver Krook, our chief or of correspondents, thank you very much. Stay with us. More from Bloomberg day Break Europe coming up after this.

13:02 Now.

13:03 Europe is chasing a big goal to convince its savers, who have some eleven trillion euros stashed in bank accounts, to finally develop a lust for stocks and bonds. The European Union supporting efforts to develop new savings and investments accounts and the hope they can help pump money into businesses across the continent, empower European growth and prosperity. Our senior finance reporter at Laura Nunan joins us for more on this story.

13:25 Laura, good morning.

13:26 How is the EU driving these efforts to try and get more Europeans to invest in There is any progress being made?

13:33 So the European Union is taking a multi pronged approach to driving this. The most visible thing I guess that individuals will see is this push behind creating these special accounts which would ideally have some kind of attacks benefit to them, which will make it much more accessible for Europeans in individual member states to actually put money in as little last ten euro month into stocks and bonds and other funds every month. I say ideally, because the way the European Union is doing this is mostly through telling countries what it would like them to do, because tax policy isn't something which the Union can actually compel countries to do.

14:11 The other thing which they're.

14:12 Doing is trying to change how markets are supervised, So listeners who follow that end of the file will know that there's a big push for ESMA, which supervideses markets that take on more direct responsibility.

14:23 The EU is hoping that that.

14:25 Will give people the confidence that they need to invest across different markets if it's all supervised by a central authority, rather than kind of someone in one part of the EU trusting that there's a supervisor in some far flung part of the EVE doing his job properly and doing his job in the same way to keep their savings safe.

14:44 Laura, this is a massive project with lofty ambitions. It's been in development for years now. What are the sort of obstacles that are coming up in the process towards this very lofty goal that EU has.

14:57 Well, there are some practical obstacles.

15:00 I mentioned the point around tax, which is proving quite challenging, but there's also the issue of attitudes and how.

15:05 Broad the EU is because the EU is.

15:08 So many member states, and the relationship that people in France and Germany have with savings is not the same as the relationship. So for this piece we went to Laffia and spoke to Laffian's where there's a very low propensity to invest in in shares. So there are so many different markets who all do things very differently.

15:26 These investments in shares, which the EU.

15:28 Would like to have ideally, because equity investment is a big part of what it takes to get businesses going, that is competing with.

15:34 Investment in government debt.

15:36 Now, a lot of countries do already have preferential tax treatment for government debt and that is quite helpful to them in raising government debt, so there's kind of a disincentive to have other funds competing with government debt. But the biggest obstacle is really I think a philosophical one. It's trying to get people into that risk taking mentality, because if you compare to other countries like the US, there's just not that there's the kind of their default feeling seems to be if I put my money into equities, I could lose it all. And of course you could lose it all, but the chances of losing it all are very slim. If you go for a broad fund, it's more likely. If you think about the big crashes

16:18 people lost five ten percent, the chances all if you put all your money into a broadly linked equities fund of but all disappearing are pretty slim. But that's the immediate reaction people have when you talk to them. The other thing is the idea that people in one member state would want to invest in businesses in other member states.

16:37 That's a bit of a hard sell as well, because people still tend to think in terms largely of their country as being France, Germany, Italy, Spain, not as being Europe.

16:49 And that is something else which.

16:50 The EU has tried to encourage people to see Europe as a single destination they would want to invest in, and I think that's harder as well.

16:59 Is trying to say that you know, by investing you could help to boost the broader European economy and outcomes as well. Is that a clear enough message to try to sell to Europeans? And I suppose how else do you create that environment to encourage people to take what is a risk, although a mitigated risk, as you point out.

17:21 So I think there's two aspects to it. One is trying to channel the European spirit. I think that's something the EU has been trying to do when they're trying to position these savings as well around big strategy things like green like defense, like things that I like, infrastructure like things that you desperately needs. The challenge there is, as I said, people don't really think European in a lot of these members states. So I think people are more likely to get behind if I am sitting in the Spain and I invest I can help Spanish infrastructure, Spanish defense. That's the challenging thing getting from national to regional.

17:55 But the other more effective way might be just the pure self interest way.

18:00 So the EU has developed.

18:01 Some things like if you look at the EU's website around this, you'll see stuff like if you left your money in savings at and most of these savings are earning one percent, and that will actually be high for them savings. So it'll be like if you left your savings at one percent for the last twenty years, you would have gone this. If you put it into a broad based European index, you would have gotten much much more.

18:23 And I think I think people realistically are most people are more self interested than they are interested in the future of the European project. And I say that there are some people who feel patriotic about this, but I think possibly the most compelling way to sell it is going to be people saying that they will have much more money for their own retirements, for their own savings, for their own safety net if they do this.

18:51 Thanks for listening to Bloomberg Daybreak Europe.

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