Brussels Edition: Italian Punishment

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

The European Commission today is expected to take the first step toward starting a disciplinary process over Italy’s failure to rein in its debt. The move — which paves the way for financial penalties up to 3.5 billion euros — is set to inflame already tense relations after months of strained talks between Brussels and Rome. It may also embolden Deputy Prime Minister Matteo Salvini in his push for a revamp of EU rules and challenge his coalition partner back home.
— Viktoria Dendrinou  

What’s Happening

Greek Woes | Italy won’t be the only one to get bad news from Brussels today. The commission will also publish a report on Greece’s post-bailout track record, lambasting the government’s recently announced tax cuts and handouts and telling Athens it’s lagging on pretty much all required economic overhauls. But with elections looming in a month, it’s unlikely that Alexis Tsipras will be the one to pick up the bill for his bonanza. 

Cunning Plan | After Jared Kushner’s surprise visit to Brussels, EU diplomats gather this morning to prepare the bloc’s response to the anticipated U.S. Middle East peace plan, which is expected to shelve the two-state solution in exchange for a hefty financial assistance to Palestine. While the EU sees the creation of an independent Palestinian state as a cornerstone of its foreign policy, it will seek to back any elements of the plan deemed workable, and lobby the Palestinians against an outright rejection.

Danish Ballot | Denmark could soon have its youngest prime minister ever, with voters set to pick a left-wing government in today’s parliamentary election. Most surveys point to a victory for the Social Democrats and their 41-year-old leader, Mette Frederiksen, who has restored the party’s fortunes by pledging more welfare spending and stiffening its immigration policy to reconquer votes. 

ECB Anguish | European Central Bank policy makers are gathering in Lithuania today with stimulus on their minds. They are preoccupied by plunging inflation expectations — yesterday’s readings for May were disappointing —  as escalating global trade tensions whack confidence and stoke recession fears. Here’s a look at their toolbox. 

In Case You Missed It

Antitrust Attack | Angela Merkel blasted the EU’s merger rules for failing to take into account growing Chinese dominance and hampering efforts to compete on the global stage. The German leader delivered her bluntest critique yet of the EU’s antitrust regime as Berlin and Paris push for more leeway to build European champions with the scale to take on rivals from China and the U.S. 

Eastern Rumblings | Poland’s prime minister shuffled his cabinet following a landslide victory in EU elections, shouldering more responsibility as he eyes another triumph in this fall’s parliamentary vote. Across the border,  some 100,000 Czechs gathered at Prague’s Wenceslas Square — the site of rallies that toppled communism — to step up pressure on billionaire Prime Minister Andrej Babis. 

Censoring Hate | Facebook may be ordered to remove offensive content posted by users in the EU and then also hunt for similar posts anywhere in the world, according to an EU court opinion that the internet giant warned was a threat to freedom of speech. The court ruling, expected in a few months, will help clarify to what extent social media companies must police posts by users worldwide. 

Merkel’s Partner | As Germany’s second-biggest party begins the search for a new leader, many of the most likely candidates are taking themselves out of the race. Here are some of the people who will help decide whether the Social Democrats stay in a coalition with Merkel or leave government, and who could end up running the party. Meanwhile, Merkel’s successor took another blow in polls. 

Chart of the Day

Eco-conscious consumers are giving up meat and driving electric cars to do their part for the environment, but what about that bowl of rice? The staple food is by far the most polluting grain and global rice farming could have the same detrimental effect on global warming in the short term as 1,200 average-sized coal power plants, according to the New York-based Environmental Defense Fund advocacy group.

Today’s Agenda

All times CET.

• 9:30 a.m. The EU’s top court rules in a case over whether a Skype service that allows customers to make calls is an “electronic communications service,” which would mean it should have been notified to the Belgian regulator
• 10 a.m. Working group of EU diplomats meets in Brussels to discuss EU preparation for a U.S Middle East plan, escalation of tensions in the Gulf, as well as the latest developments in the Maghreb region 
• 11 a.m. Zoran Zaev, prime minister of North Macedonia, gives press conference at EBRD event in Brussels
• 11:45 a.m. Former ECB Chief Economist Peter Praet speaks at the Belgian central bank about macroeconomic and financial stability 
• 2:30 p.m EU Council President Donald Tusk, Ukrainian President Volodymyr Zelenskiy brief press in Brussels
• EU Commission to publish country specific recommendations and Greek enhance surveillance report 
• Ivanka Trump at the closing plenary of Global Entrepreneurship Summit in The Hague

--With assistance from Nikos Chrysoloras and Nick Rigillo.

To contact the editor responsible for this story: Zoe Schneeweiss at zschneeweiss@bloomberg.net, Dan Liefgreen

©2019 Bloomberg L.P.