Brussels Edition: The Ultimate Weapon

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

European leaders will today haggle over the creation of a pandemic response credit line. If they agree, they will invite euro-area finance ministers to finalize the details of the instrument by next week. Such a decision may pave the way for the European Central Bank to launch its ultimate weapon: buying almost unlimited amounts of government bonds under the Outright Monetary Transactions program. That would keep borrowing costs low while member states go on a spending spree to cushion the economic shock from the coronavirus. The call between leaders today is expected to highlight their divisions, especially when it comes to possible  joint debt issuance and the conditions attached to any borrowing from the euro area’s bailout fund. Such divisions don’t bode well for the bloc’s ability to respond if things get even bleaker.

What’s Happening

Coronavirus Count | The daily death count in Italy’s hardest-hit Lombardy region fell to 300 from 402, but elsewhere across the continent fatalities showed  few signs of slowing. Spain, where doctors are being forced to choose who will die, had its deadliest day, while Britain’s Prince Charles became the latest high-profile infection, leading to concerns about the health of the Queen. Here’s the latest.

German Bailout | It’s been a long time coming, but Germany has declared a state of emergency that allows it to suspend constitutional debt limits and unlock 156 billion euros of extra borrowing, roughly half of its normal annual spending. It’s needed to combat the country’s biggest economic slump in decades, even if its virus death toll is lagging European peers.

Banking Relief | European authorities are considering more relief for banks dealing with bad loans because of the virus, adding to recent measures that allow them to tap capital reserves and limit provisions for loan losses. This time, regulators may soften the blow of accounting rules, though it’s a bit of a double-edged sword, as it could also cause investors to lose confidence in the region’s banks if it is deemed to conceal actual risk on balance sheets.

Ground Rules | While bailouts are what they may ultimately need, airlines today will secure another form of relief prompted by the virus: an EU waiver on the required use of their airport slots. The European Parliament is due to vote this evening to suspend the EU’s “use-it-or-lose-it” slot rule, with the only question being whether the assembly endorses a suspension of four months or eight months.

Polish Judges | The EU’s top court will today decide whether a 2017 Polish law that gives a politically-appointed body the right to conduct investigations into court rulings undermines their independence. An EU court adviser said in September that such questions were “hypothetical,” but Poland has since passed new regulations that enable disciplinary actions against judges simply for following EU legal guidelines.

In Case You Missed It

Going Nuclear | Nuclear scientists in Austria are closing in on new coronavirus testing kits that could dramatically lower the cost and time it takes to get a diagnosis. The International Atomic Energy Agency said it can produce Covid-19 tests costing as little as 10 euros that yield a result within hours, and the kits are close to being shipped.

Putin’s Plans | Even Russian President Vladimir Putin’s well-laid plans have been thrown off course by the coronavirus. He’s delayed a public vote on constitutional changes next month that would allow him to rule to 2036. While cases in the country remain well below those in some big European nations, they have jumped in recent days, with Russia on the verge of recession due to the collapse in the price of oil.

Gold Rush | It might sound like the dictionary definition of “First World problem,” but the world’s richest are struggling to get hold of gold as governments close scores of businesses, making it increasingly difficult for people to get their hands on the physical product. Here’s how some are still managing to cash in on the gold rush.

Happiness Report| There might not be much to make you smile at the moment, but Finland has once again been crowned the world’s happiest country by the World Happiness Report. Afghanistan ranked lowest among 153 nations, with South Sudan and Zimbabwe just above it. The U.S. came in 18th.

Chart of the Day

It’s not just grocery shoppers hoarding staples. Some governments are moving to secure domestic food supplies during the conoravirus pandemic. Kazakhstan, one of the world’s biggest shippers of wheat flour, banned exports of that product along with others, including carrots, sugar and potatoes. Vietnam temporarily suspended new rice export contracts, Serbia has stopped the flow of its sunflower oil and other goods, while Russia is leaving the door open to shipment bans.

Today’s Agenda

All times CET.

• 9:30 a.m. The EU’s top court will rule in cases concerning the legality of Poland’s judicial disciplinary system
• 4 p.m. Video call of EU leaders to discuss coronavirus response. Press conference expected at 6 p.m.
• The EU’s second-highest court rules in a challenge by Viasat to a 2017 decision by the European Commission over access to documents linked to a call for applications for pan-European systems providing mobile satellite services

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