Brussels Edition: How Low Will We Go?

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

The European Central Bank looks set to join the global trend toward looser monetary policy today by signaling that it’s preparing for another interest-rate cut. The expectation has pushed borrowing costs for governments and businesses across the euro area to rock bottom, but whether this is enough to revive the economy remains to be seen. The latest disappointing data from Germany will further strengthen voices arguing that it’s time to loosen public purse strings, as the monetary policy arsenal dries up. 

What’s Happening

Spanish Vote | Pedro Sanchez will again seek permission from Spanish Parliament to form a government after failing in a similar bid earlier this week, as the acting prime minister tries to avoid a fourth general election in as many years. At stake is the country’s ability to protect an economic expansion that began in 2013 and move on from the current political turbulence. Here’s our guide to the vote.

Team Boris | The U.K. will leave the EU with or without a deal at the end of October, new Prime Minister Boris Johnson said, as he assembled a new cabinet packed with Brexiteers after celebrating with  salmon mousse, rosé champagne and a magician performing card tricks. The maverick trio who delivered the Brexit vote in 2016 have now taken over the government and will attempt to finish what they started. 

Unhappy Anniversary | A year to the day since Jean-Claude Juncker and Donald Trump struck a deal for a trade truce, the risk of a resumption of tensions appears to be as high as ever. Negotiations to slash industrial tariffs have yet to start because the U.S. remains insistent on including agriculture in the talks, a Trump threat to hit EU cars with duties is still alive and both sides are heading toward retaliatory levies over subsidies to Airbus and Boeing.

Scorched Europe | Thermometers in much of the continent will probably record new historical highs today. Europe’s busiest rivers are drying, nuclear reactors are scaling back output, rail tracks buckle and wildfires are raging in this summer’s second massive heatwave. The question is whether the devastation will convince governments to do more about climate change. 

In Case You Missed It

German Slump | Industry in Europe’s largest economy took another battering in July, with a drop in a key measure adding to gloom surrounding multiple corporate profit warnings. As Germany’s economic troubles multiply, there’s no sign of a domestic boost from Chancellor Angela Merkel’s government.

Dirty Money | The European Commission called for a further tightening of rules to fight money laundering after identifying a host of failures that led to scandals across the financial system. Banks at times completely ignored requirements to stop illicit financial flows, and supervisors were ill-equipped and often slow to deal with the issues, the Commission said. 

Italian Detente | Deputy Prime Minister Matteo Salvini had everyone worried he would force the collapse of Italy’s government. Now he’s won concessions that have appeased him, at least for the moment. As for the allegations that Salvini’s League party solicited illegal funding from Russians, “nothing to see here,” according to Prime Minister Giuseppe Conte. 

Fight at the Museum | Warsaw’s award-winning Jewish museum has become the latest source of tension between Poland and the Jewish community after the government has repeatedly clashed with international allies over the telling of the country’s World War II history and the memory of the Holocaust. The latest row is over the fate of its director,  Marek Strzelecki reports.

Quiz | And now for our weekly quiz. Which euro-area central bank chief was drawn to his current job at a young age thanks to chewing gum? Find the answer in tomorrow’s Brussels Edition.

Chart of the Day

Saudi Arabia might well be the lone bright spot on the bleak economic picture painted by the International Monetary Fund for next year. As it turned downbeat on the global outlook, the IMF lifted its forecast for the world’s biggest crude exporter the most among major economies, thanks in part to government spending this year and a pickup in its oil industry in 2020. The kingdom has now gone full circle after suffering the deepest growth downgrade in the January outlook, matched only by Germany.

Today’s Agenda

• 11 a.m. Eurostat to release date on life expectancy at birth
• 2:30 p.m. Press conference following ECB Governing Council meeting

--With assistance from Viktoria Dendrinou and Jonathan Stearns.

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

©2019 Bloomberg L.P.