Brussels Edition: Back in the Saddle

(Bloomberg) -- Welcome to the Brussels Edition, Bloomberg’s daily briefing on what matters most in the heart of the European Union.

Summer’s over and we’re back. It’s not like anything major happened while we were away. Well, okay, Italy is getting a new government; Emmanuel Macron threatened to block the EU’s Mercosur trade deal, outraged over the Amazon fires; and the U.K.’s new prime minister is being accused of undermining parliamentary democracy. But buckle up. There’s more excitement in store. This week, incoming European Commission President Ursula von der Leyen is expected to start deciding on the allocation of portfolios in her new team, which will determine key policies for the next five years. While governments are lobbying for important slots, Brussels officials say the president-elect is keeping her cards close to her chest, so be ready for some surprises.

What’s Happening

Pompeo in Town | U.S. Secretary of State Michael Pompeo is in town tonight and tomorrow, and is expected to meet von der Leyen. There’s no shortage of issues to discuss, from trade tariffs to climate policy. The EU’s most immediate concern is the collapsing Iran nuclear deal, with Thursday marking the latest deadline from Tehran before it starts enriching uranium at higher levels.

Fork in the Road | Today marks the start of one of the most crucial weeks in modern British political history. Boris Johnson’s decision to suspend Parliament from next week until the middle of October means the next few days may be the last chance for MPs to block a no-deal Brexit. What happens between now and next weekend could alter the course of the U.K.’s departure from the EU, prompt a general election, upend Britain’s unwritten constitution and change the country for decades.

Italian Government | Italy’s old and new prime minister, Giuseppe Conte, is hard at work on putting together his team of ministers and laying out the priorities of his new government. The new coalition supporting him — an unlikely alliance between the former rivals of the Five Star Movement and the Democratic Party — may be just as difficult to manage as the previous partnership that collapsed last month.

Economy Clues | The mood music for the ECB’s upcoming Sept. 12 policy decision is getting louder. German factory orders and industrial production data will reveal whether the weakness of the second quarter persisted into July, while speeches by policy makers including ECB Chief Economist Philip Lane may offer clues and guidance, amid growing resistance to demands for further stimulus.

In Case You Missed It

Populists Thwarted | Angela Merkel’s troubled coalition avoided a deeper crisis by securing enough support to hang on to power in two states in Germany’s former communist east. But the less-than-convincing victories owe more to voters turning out to keep the far-right AfD from winning elections for the first time than conviction in the government’s direction.

German Coal | German populists have been riding the wave of discontent about the government’s decision to phase out coal-fired power generation. Germany’s mining heartland is just one of many battlegrounds emerging across Europe as demands for climate action clash with the continent’s economic reality and tradition.

Rooftop Power | There’s little doubt that arresting and adapting to climate change is becoming the new fault line in European politics. But there are solutions: Europeans can massively expand low-cost solar generation just by tapping the space over their heads.  Jonathan Tirone has the story.

Spanish Instability | Spain’s acting Prime Minister Pedro Sanchez is convinced he can still form a minority government and avoid fresh elections after his Socialist party failed over the summer to win a confidence vote. While Sanchez ruled out new talks to form a ruling coalition with the anti-austerity party Podemos, he insisted he can reach consensus with them over a policy program.

Secession Movements | One of the biggest hurdles to Spanish political stability is the continuing row with Catalan separatists. Here’s why. In other secessionist news, polls show that support for Scottish independence is growing. But while the political and emotional arguments may be stacking up, questions remain over the economics of such a move, as Eddie Spence explains.

Chart of the Day

The EU may still be waiting for Italy to propose its European Commissioner, but there’s little question that Ursula von der Leyen, who has vowed to lead a gender-balanced executive, will get as many women on her team as she wanted. Whoever Rome decides to put forward, von der Leyen seems set to have more parity than any of her predecessors’.

Today’s Agenda

All times CET.

• 10 a.m. EU foreign policy chief Mogherini speaks at annual EU Ambassadors Conference in Brussels
• U.S. Secretary of State Pompeo in Brussels, meetings closed to media
• EU diplomats in Brussels to discuss six-month extension of sanctions targeting Russia over undermining Ukraine’s sovereignty. They will also discuss amending the list of individuals and entities targeted
• Deputy Iranian Foreign Minister Araghchi visits Paris with an economic delegation to discuss French proposals for preserving the nuclear deal
• European Central Bank Vice President De Guindos, Executive Board members Mersch and Lautenschlaeger speak at ECB Legal Conference in Frankfurt

--With assistance from Craig Stirling, Alessandro Speciale and John Follain.

To contact the editor responsible for this story: Vidya N Root at vroot@bloomberg.net, Iain Rogers

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