Brussels Edition: Punishing Turkey

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

Relations between the European Union and Turkey are set to hit a new low today, when the bloc’s foreign ministers announce a suspension of most high-level contacts with Ankara, confirm another cut in financial aid, freeze negotiations on an aviation accord and reaffirm the threat of sanctions targeting companies involved in energy exploration off the coast of Cyprus. The spat over Mediterranean natural-gas reserves adds to a series of disagreements straining ties between European nations and their NATO ally — from democratic standards to the purchase of Russian missiles. While an escalation is in no-one’s interest, so much is piling up that it looks increasingly difficult to avoid.

What’s Happening

Gulf Gloom | With Iran breaching the 2015 nuclear deal that the U.S. has abandoned, and Britain raising the threat level for ships in the Gulf to the maximum, ministers will also debate growing hostilities in the region. They’ll press Tehran to reverse the violations (to avoid renewed EU penalties) and stress progress in deploying a French-German-British tool to shield European trade with Iran from U.S. sanctions.

Balkan Parley | French President Emmanuel Macron visits Balkan candidate for EU membership Serbia to smooth ties after his recent anti-enlargement comments and possibly help revive talks between the biggest former Yugoslav republic and Kosovo. A spot of relative stability in the western Balkans, Serbia may welcome French efforts to enhance its presence in the region where companies such as Vinci and Alstom are already active.

Tight Vote | Ursula von der Leyen’s bid to become European Commission president is going down to the wire. The German defense minister is still seeking support from left-of-center members of the European Parliament to secure the absolute majority needed in the 751-seat assembly, which is due to vote on her nomination tomorrow evening in Strasbourg.

Alitalia Deadline | Alitalia has been under special administration, it’s losing around 700,000 euros per day and it hasn’t posted a profit for at least 15 years. A deadline today for binding bids is set to be extended — and the best you should probably expect is simple expressions of interest from investors who could potentially salvage Italy’s flag carrier.

In Case You Missed It

Russian Cash | Elsewhere in Italy, Deputy Prime Minister Matteo Salvini’s efforts to quell the fallout over reports his League Party was soliciting Russian financing suffered a setback when the country’s prime minister contradicted his recollection of events. It’s too soon to say whether the Russian financing scandal has dented Salvini’s popularity at a time when many of his allies are pushing for him to break with his Five Star coalition partner and seek early elections.

EU Army | France’s long-term “ambition” is to work with several other states to create a European Army to share in procurement, command and operations, Defense Minister Florence Parly said, reaffirming the plan announced by President Macron. While details and the time-frame are still unclear, the plan has led to tensions with Donald Trump, who has interpreted the initiative as an effort to shut out the U.S.

Hard Brexit | Boris Johnson will face a tough fight from political heavyweights if he tries to suspend the U.K. Parliament to force through a no-deal Brexit. Johnson, the favorite to succeed Prime Minister Theresa May this month, has refused to rule out proroguing Parliament to fulfill his pledge to take the U.K. out the EU on Oct. 31, triggering a wave of reactions across the political divide from those who say they are concerned about upholding Britain’s constitution.

German Extremists | An upsurge in political violence in Germany culminated last month, in what appears to be the first assassination of a politician by a right-wing extremist since the end of the Nazi-era. In a country where ultra-nationalistic and xenophobic fringe movements have become more public and outspoken in recent years, the brutality of the murder was a wakeup call, Raymond Colitt and Arne Delfs report.

Chart of the Day

The euro zone’s continued demand for factory jobs is a mystery that may be the only thing staving off recession right now. While manufacturing in the currency bloc has been on a downward trajectory since the start of last year, this contraction in activity has not caused employment to decline, thus making a recession unlikely.

Today’s Agenda

All times CET.

• 10 a.m. EU foreign affairs council in Brussels; ministers will probably decide punitive measures against Turkey and will also discuss Venezuela and Iran
• 3 p.m. EU agriculture ministers meet in Brussels; to discuss agricultural policy beyond 2020, Mercosur agreement, developments in the sugar sector
• 5 p.m. Plenary of the European Parliament begins in Strasbourg
• NATO Secretary General Stoltenberg visits Canada, meets Prime Minister Trudeau and gives a speech followed by a Q&A session at the University of Toronto’s Massey College
• French President Macron visits Serbia
• Contest to choose Theresa May's successor nears conclusion. Boris Johnson and Jeremy Hunt will take part in a live radio debate as grassroots party members cast their postal ballots
• Czech junior coalition partner, the Social Democrats, will decide whether to stay in Prime Minister Babis’s government following a clash over cabinet posts

--With assistance from Misha Savic and Tommaso Ebhardt.

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

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