Brussels Edition: Trade Woes, ECB Divisions, Compliant Italy

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

Transatlantic relations may be heading south fast. The World Trade Organization is poised next week to authorize the U.S. to impose tariffs on nearly $8 billion of European goods due to illegal state aid provided to aircraft maker Airbus. Some officials in Brussels and in national capitals are advocating an aggressive response, which would see the EU retaliating with tariffs on more than $4 billion of U.S exports. Such a move would mark a serious escalation and add to levies they’ve already slapped on one another. The vicious circle shows no signs of breaking.

What’s Happening

Ungrateful Zelenskiy? | This may not go down well in Brussels, Berlin, or even Kyiv: Ukrainian President Volodymyr Zelenskiy took turns with Trump badmouthing the EU, details of a call between the two released by the White House showed. While Trump’s jabs are no surprise, Europe may have expected a less servile tone from the head of a country that’s benefited from billions in EU aid.

Brexit Mess | Boris Johnson says he wants a Brexit deal with the EU, but the European Commission continues to reject his proposals on how to get there. He seeks to lead Britain out of the bloc next month, but the U.K. Parliament won’t let him. He pleaded again last night for a snap election to resolve the impasse; the opposition won’t listen until he takes no-deal off the table.

Clearing Sequel | The battle over London’s dominance in the derivatives market is brewing again. Industry groups fear that EU contingency measures granting access to clearinghouses in the U.K. through March next year are not enough to defuse the threat to financial markets posed by a no-deal Brexit. They’re preparing to push for another reprieve.

Compliant Budget | Italy’s new government is drafting a 2020 budget that’s fully compliant with EU rules, as it focuses on boosting the country’s credibility within the bloc. Finance Minister Roberto Gualtieri will present a financing framework — with targets and forecasts — to parliament in the next few days, and his priority is to boost growth and contain the deficit, a senior official said.

In Case You Missed It

ECB Divisions | In what is perhaps the most dramatic manifestation of deep divisions among ECB policy makers to date, Executive Board member Sabine Lautenschlaeger abruptly resigned late yesterday. While the central bank gave no reason for her departure, the German jurist has been a frequent critic of Mario Draghi’s monetary policy stance. It’s probably not a coincidence that her resignation came as Italy proposed another dove, Fabio Panetta, for the ECB board.

Greek Promises | Greek prime minister Kyriakos Mitsotakis told us in an interview that he wants to reduce taxes and improve the investment climate in his country as he attempts to turn the page on the crisis era. Mitsotakis, who portrays himself as a business-friendly leader, must now prove that he can fulfill his promises.

More Action | Angela Merkel’s $60 billion climate package is likely to be upgraded on its passage through the German parliament, amid growing criticism that it’s too timid. While Merkel’s coalition has a majority in the lower house, or Bundestag, it lacks one in the upper chamber, the Bundesrat, where the Green party has a stronger representation and could push for changes.

Nuclear Startup | A startup in the smallest Baltic state could play an outsized role picking the winner in what the nuclear industry hopes will be its next big thing. Read how a small modular reactor could provide cheaper and more flexible generation than traditional atomic plants, weaning Estonians off their dependence on oil, while also securing energy independence from Russia.

Chart of the Day

The EU is shipping pork to China at a breakneck pace, as the Asian country struggles to contain a deadly swine virus that’s led to millions of pig deaths. Exports jumped 45% in the first seven months of the year, approaching the total for all of 2018, EU data show. But there’s a question over how long sales can keep rising.

Today’s Agenda

All times CET.

• 9 a.m. EU Competitiveness ministers meet in Brussels; will hold a public policy debate on the long-term EU strategy for sustainable growth
• 10 a.m. ECB publishes monthly economic bulletin
• 11 a.m. Eurostat publishes quarterly data on asylum applications
• 3:30 p.m. ECB’s Draghi delivers welcome address at ESRB conference in Frankfurt
• 4:30 p.m. European Capital Markets Institute presents report on reforming capital markets
• 5 p.m. EU Commission President Juncker meets Croatian Prime Minister Plenković in Brussels
• 6:45 p.m. European Council President Tusk addresses UN General Assembly
• EU27 ambassadors meet in Brussels to take stock of latest Brexit developments
• Eurogroup working group of senior finance ministry officials meets
• EU trade chief Malmström meets German Economy Minister Altmaier

--With assistance from Nikos Chrysoloras, Bryce Baschuk and Jonathan Stearns.

To contact the editor responsible for this story: Vidya N Root at vroot@bloomberg.net, Iain Rogers

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