Brussels Edition: Breakdown in Berlin

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

Barely a week goes by without a European government splintering. This time it’s the coalition governing the region’s biggest economy fighting for survival after one of its biggest supporters abruptly stepped down. The surprise resignation of Germany’s Social Democratic Party leader, Andrea Nahles, was triggered by an abysmal result in the European elections amid a seismic surge in support for the Greens. There are also increasing doubts about whether Merkel’s designated successor is up to the job — a sea of German angst right in the middle of tricky talks about who will lead the EU’s main institutions.

What’s Happening

Carbon Trading | Government officials and policy experts from around the world gather in Brussels today to discuss how carbon markets can operate at a global level. The markets, which generate tradable carbon units for reducing emissions, are seen as a key tool in the battle against catastrophic climate change. Yet countries have so far failed to agree on how they can function across jurisdictions.

Budget Pressure | With less than a month until a deadline for a final agreement on a euro-area budget, finance ministry officials will try today to limit the outstanding issues ahead of a ministers’ gathering. But without much consensus on how such an instrument will be financed, how the money will be spent or even the amount at stake, it remains unclear whether an accord later this month is possible.

Donald’s Advice | The roads in central London are being closed, the extra police are on patrol, and the giant inflatable baby is being prepared. Britain is ready to welcome Donald Trump. The U.S. president has given a flurry of interviews urging Britain to go for a hard confrontation with the EU in withdrawal negotiations. And his relationship with outgoing Prime Minister Theresa May will likely end the same way it began: with awkward attempts to overcome a lack of personal chemistry.

French Expectations | French Finance Minister Bruno Le Maire will demand an overhaul of EU antitrust rules when he addresses a conference in Paris today. The European Commission should take a broader view before blocking potential mergers and look more closely at the benefits, according to La Maire’s prepared remarks. Meanwhile, he is getting involved in the talks over a proposed merger of Renault and Fiat Chrysler.

Finnish Spending | Finland’s incoming government is due to unveil its program and composition today. Leaks so far suggest we should expect a spending spree. Additional cash for education and infrastructure will partly come from potential levies on dividends, capital gains and fossil fuels.

In Case You Missed It

Starting Lane | Philip Lane is beginning his first week as the European Central Bank’s top economist – and it’s a big one. The Irishman will immediately be met with a flurry of new data, updated forecasts and a policy meeting at which he’ll present the ECB Executive Board’s proposals. It’s a critical moment, with some officials losing confidence in the recovery amid global trade tensions.

German Question | One candidate to succeed Mario Draghi as ECB president has yet to settle the question of whether he accepts the Italian’s defining legacy, Paul Gordon reports. If Bundesbank President Jens Weidmann really wants the job, his litmus test will be his stance toward both Draghi’s pledge to do “whatever it takes” to save the euro and the subsequent bond-buying plan he testified against in court.

Orban’s Choices | Hungary’s ever-decisive leader, Viktor Orban, is hesitating to pick sides in the redrawn political landscape after the European Parliament elections, as gains by some of his allies were insufficient to create an instant alternative to his estranged mainstream center-right family. Meanwhile, he’s pressing ahead with plans to curb the autonomy of academic research institutions despite repeated protests.

Danish Elections | Inequality is emerging as a key theme ahead of Denmark’s general election on June 5.  As Danes see the results of populism play out in Britain and the U.S., there’s a growing movement to ensure nothing similar happens on their turf. Politicians have been quick to zero in on income inequality, but anger over corporate greed is also spreading to other arenas.

Chart of the Day

Millions of Liverpool fans around the world cheered their team’s 2-0 victory over Tottenham Hotspur in Saturday’s Champions League final in Madrid, but for one billionaire on the other side of the Atlantic it was especially gratifying. John Henry, who has put his money behind Liverpool since 2010, can collect substantial gains, Tom Metcalf and Ben Stupples report.

Today’s Agenda

All times CET.

• 11 a.m.  Austria’s interim government is sworn in
• 2:45 p.m. Climate envoys, government officials and industry experts meet in Brussels to discuss international carbon markets
• Working Group of senior euro-area finance ministry officials meets to discuss plans for a budget for the currency bloc, as well as reform of the European Stability Mechanism and a joint deposit guarantee system
• Romanian Prime Minister Dancila starts two-day visit to Brussels to try to regain the trust of EU officials after a controversial judicial overhaul
• Informal meeting of EU agriculture ministers in Bucharest
• U.S. Secretary of State Pompeo and Dutch Prime Minister Rutte attend the Global Entrepreneurship Summit in The Hague
• U.S. President Trump begins U.K. visit

--With assistance from Ewa Krukowska.

To contact the editor responsible for this story: Heather Harris at hharris5@bloomberg.net, Iain Rogers

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