Brussels Edition: Rome’s War of Words

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

As the Italian Parliament’s lower house votes today on the fiscal outline forming the basis for next year’s budget, Brussels is getting increasingly worried, not just by the numbers, but — more crucially — by the strident anti-EU utterances from Rome. An EU official told us that while the European Commission’s process for the potential “rejection” of the draft budget will be rapid, the degree of escalation in the spat will depend on market reaction and the potential revision of Italy’s credit rating. The volley of words has already taken its toll on the country’s bond and stock markets.

What’s Happening

Italian Fundamentals | Speaking of market reaction, we asked Bruegel Director Guntram Wolff whether Italian assets are oversold. He reckons “something more profound” is at stake than next year’s deficit, namely whether Italy is ready to continue to commit to fiscal sustainability in the long term. It doesn’t help that “the rhetoric of the government fundamentally questions the relation to the EU, but membership in a club implies cooperation and respecting the jointly agreed rules.”

Cyber Sanctions | Several EU member-states, including the U.K. and the Netherlands, have asked for the inclusion of a paragraph in the conclusions of next week’s EU Summit, paving the way for the development of a “cyber sanctions” regime, according to an internal memo. The measures would target individuals and entities, including companies, engaged in malicious activity on the web. A new draft of the conclusions will be circulated on Monday.

Copernicus Unleashed | The EU has once again activated its emergency Copernicus satellite mapping service to support U.S. authorities with Hurricane Michael. Given that the skies are studded with U.S. satellites, you might ask why they’d need help from the EU. Turns out Copernicus uniquely provides not only maps but layers that are very helpful in identifying flooding.  

In Case You Missed It

Crypto Threat | EU policy makers hesitating with regulating the crypto market got some backing from the Financial Stability Board. In its latest report, the global regulator said crypto assets currently “do not pose a material risk to global financial stability,” while warning that limited information on leverage in the market and the financial-institution exposure makes monitoring a challenge.

Research Costs | The U.K.’s Financial Conduct Authority is examining whether brokerages are violating EU’s MiFID II rules by charging too little for investment research, Stephen Hanks, the regulator’s manager for markets policy, said at a Bloomberg event in London. The acceptable pricing level is of great interest to the industry amid the competition for declining research budgets.

Brexit Drama | EU chief Brexit negotiator Michel Barnier said a deal with the U.K. is within reach, but obstacles remain...of course. The next key meeting on the matter is tomorrow afternoon in Luxembourg, where EU27 envoys will discuss the draft political declaration between the two sides and the draft withdrawal agreement.  

Abandon the Euro | Former White House strategist Steve Bannon said in a Bloomberg interview that the euro should be abandoned over time. Bannon said his support of “The Movement,” a Brussels-based organization promoting populist political groups, is aimed at turning the EU back into a “collection of sovereign nations” rather than an economically and politically-integrated bloc.

Dutch Drive | Frans Timmermans, the European Commission’s principal vice president, announced his bid to assume the top job next year. At an event in his Dutch hometown, Timmermans said he’d seek to be the lead candidate of Europe’s Socialists. Maros Sefcovic of Slovakia, a fellow EU commissioner, is also bidding to be the socialist nominee, which has set an Oct. 19 deadline for candidates and plans to select one of them on Dec. 1.

Correction: In yesterday’s Brussels Edition, we described EU Council President Donald Tusk as “EU Commission President.” Blame it on our excitement about his meeting with Bono. Apologies.

Chart of the Day

Poland is hoping the European Parliament’s resolve to crack down on fossil-fuel emissions will soften after elections next year likely bring gains for anti-establishment parties. The EU’s biggest coal producer is struggling with a surge in energy prices, which undermine the competitiveness of its $525 billion economy. A growing role for EU lawmakers who espouse similar views as U.S. President Donald Trump may translate into softer policies on emissions, blunting the force of higher carbon and power prices.

Today’s Agenda

All times CET.

• 9 a.m. Conference on the future of Europe's financial infrastructure with EU Commission’s Patrick Pearson, industry representatives

• 12 p.m. Press conference by EU Commission Vice-President Jyrki Katainen and Commissioner Carlos Moedas on “a new bio-economy strategy for a sustainable Europe”

• 12:15 p.m. Bloomberg TV interview with EU Economic Affairs Commissioner Pierre Moscovici 

• 6:35 p.m. EU Commission President Jean-Claude Juncker delivers the keynote speech at the conference “L’avenir de l’Europe est entre nos mains” in Liege

• EU trade chief Cecilia Malmstrom in Gothenburg, gives a lecture on “EU Trade Policy Between Cooperation and Confrontation” at Gothenburg University

--With assistance from Alexander Weber.

To contact the editor responsible for this story: Vidya N Root at vroot@bloomberg.net, Chris ReiterLisa Fleisher

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