Brussels Edition: Trouble in Transylvania

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

EU leaders gather in the picturesque Romanian city of Sibiu today to renew their wedding vows, while proceedings for the painful divorce from the U.K. continue. But don’t let the romantic Transylvanian setting fool you. These are troubled times for the union: the nuclear deal with Iran — arguably Europe’s landmark foreign-policy achievement — is crumbling, U.S. tariffs on cars that could throw the bloc into recession are still just a Donald Trump tweet away, and a populist surge means the 27 leaders can’t agree which values they’ll vow to protect.

What’s Happening

Nuclear Headache | Europe again finds itself squeezed between hostile governments in Washington and Tehran following Iran’s threat to abandon some of the limits to its nuclear fuel program. After a year of casting around for ways to enable companies to circumvent U.S. sanctions, Europe has come up empty and the 2015 nuclear deal could be headed for a slow death.

Still Talking | U.K. Prime Minister Theresa May looks set to survive another week at least. May, whose party gave her a stay of execution amid increasing calls for her to quit, is still trying to get a Brexit deal done with opposition leader Jeremy Corbyn. Talks continue and the two sides will exchange more documents next week.

Finnish Deal | Finland is edging closer to having a coalition government after Social Democrat Leader Antti Rinne, the winner of the April 14 election, made a surprise offer to the Center Party  to join the talks. Rinne hopes to reach an agreement by May 24 and appoint a cabinet in early June. The timetable matters because Finland assumes the EU’s rotating presidency on July 1.

Within Reach | The EU and the South American trade bloc Mercosur will likely close a trade agreement in coming weeks or months, according to Brazil’s Foreign Trade Secretary Lucas Ferraz, who told Bloomberg an accord has “never been so close.” A successful deal would create one of the world’s largest free-trade pacts and counterbalance rising tensions between the U.S. and China.

In Case You Missed It

Lofty Target | Poland, which is home to most of Europe’s most polluted cities, set a goal of 1 million electric vehicles by 2025, compared with less than 5,000 at the end of March, including plug-in hybrids. But away from the flashy headlines and lofty targets, industry executives paint a gloomy picture of infrastructure shortfalls, financial constraints and regulatory hurdles.

German Boost | German industrial output unexpectedly advanced for a second month in March, bolstering confidence that Europe’s largest economy may soon start climbing out of its rut. An upturn would be a boost for the euro area after months in which the nation’s factories have been hit by slowing global demand, and temporary shocks.

Austrian Screening | Austria plans to tighten rules on foreign investment in strategically important companies, following Germany in raising defenses for critical infrastructure or key technologies. While the law doesn’t mention China, it comes amid concern in Europe that Beijing is seeking access to sensitive technology or wants to boost its influence by acquiring key infrastructure.

Italian Backlash | Spin, bluster and outright hostility marked the Italian government’s reaction to the latest EU warning that its fiscal situation is set to worsen this year and next. The backlash sets the stage for a replay of the budget conflict between Rome and Brussels that roiled markets last year, as the government seeks to deliver on its election pledges regardless of financial constraints.

Chart of the Day

Brussels Edition: Trouble in Transylvania

The euro enjoys a high level of public support that has defied its turbulent crises, but that cheer hides a darker truth. Bank of France researchers say the wider backing for the currency is accompanied by an undercurrent of jealousy running deep among voters in member states. The task of dealing with what they call the “grass is always greener feeling” may begin at home. According to the paper, the countries where people feel they are missing out the most are also the countries where people have the least trust in their own national institutions.

Today’s Agenda

  • Informal summit of EU leaders in Sibiu, Romania
  • EU Competition Commissioner Vestager delivers keynote speech on Europe Day celebration in Copenhagen

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