Brussels Edition: Von der Leyen’s Test

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

Now for the hard part. After being unexpectedly tapped for the EU’s most powerful job by national leaders, Ursula von der Leyen has two weeks to win over the European Parliament. With a Socialist contingent seething over the backroom deal that led to her nomination for commission president, von der Leyen played it safe yesterday by visiting her Christian Democratic allies in the assembly. But she’ll need to persuade other lawmakers of her ability to see through Brexit, manage trade tensions with Donald Trump and craft a new multi-annual budget. Von der Leyen may be envious of Christine Lagarde, who faces no such political test on her way to the top of the European Central Bank.

What’s Happening

Iran’s Threats | Something that may literally blow up before Jean-Claude Juncker’s successor takes over: Iran says it will restore a mothballed reactor and step up enrichment if European nations fail to offer economic guarantees next week, escalating a crisis that threatens to end the 2015 nuclear accord and plunge the Gulf into renewed uncertainty.

Low as Japan | Lagarde may not face von der Leyen’s political challenge, but her problems will be no less serious. She assumes leadership of the ECB as deepening negative yields across the euro area support the argument that the currency bloc may be going through a process of “Japanification,” a world of permanently low interest rates, weak growth and tepid inflation. 

Brexit Fallout | Both Lagarde and von der Leyen may have to deal with the fallout of a chaotic Brexit as soon as they assume office, as both candidates running to succeed Theresa May at Downing Street appear willing to leave the EU without an orderly withdrawal deal. Boris Johnson, the favorite, has repeatedly excluded any further delay to Brexit beyond October.

Eastern Angst | Nominations for the bloc’s top jobs has left eastern members with no representative in a top position, setting the stage for frustration from Poland to Kosovo. The picks strengthen the hand of staunch critics of the erosion of democratic values as Brussels clashes with Poland and Hungary over the rule of law, while also complicating any future enlargement.

In Case You Missed It

Lagarde’s Interests | As ECB watchers try to divine how the first woman to run the world’s financial firehouse might communicate, one thing to understand is she’s a student of the arts, history, philosophy, literature and even nature, Brendan Murray explains. The ECB’s Irish chief economist Philip Lane will be her monetary brain, although Lagarde isn’t shy about expressing her own views. 

Italian Truce | The commission decided to withhold disciplinary action against Italy over its debt after the government in Rome offered fresh commitments that address some of Brussels’ concerns. The commission’s decision marks a significant detente between Italy and the EU after a months-long tussle over the country’s debt mountain. It’s a sign of the snags hitting Matteo Salvini and his push to radically change Italy.

European Batteries | The EU is starting to act like China when it comes to building batteries that will drive the next generation of cars and trucks, launching initiatives that will channel more than 100 billion euros into a supply chain for the lithium-ion packs. The goal is to build European battery firms so the region’s automakers don’t have to rely on imports from Asia.

Weekly Quiz | And now for our weekly quiz. Which senior European policy maker in the news is known for taking out a yellow bag of M&Ms and passing them round the room during crisis meetings? Find the answer in tomorrow’s Brussels Edition.

Chart of the Day

A reshuffle at the top of the ECB means Italy could be left without a seat on the Executive Board for the first time since the birth of the euro — unless the populist government can come up with a strong candidate to convince European partners. Italy loses its seat when Christine Lagarde takes over from Mario Draghi at the start of November, but an opening will come up just two months later when the eight-year non-renewable term of France’s Benoit Coeure ends. 

Today’s Agenda

All times CET.

• 10:30 a.m. Council President Donald Tusk, Commission President Juncker speak to EU lawmakers in Strasbourg
• 2:30 p.m. Tusk meets with von der Leyen in Brussels
• Informal meeting of ministers responsible for competitiveness in Helsinki
• ECB Vice President Guindos, ECB’s Supervisory Board head Andrea Enria, Single Resolution Board head Elke Koenig speak at financial regulation conference in Lisbon
• Pope Francis receives Russian President Vladimir Putin

--With assistance from Viktoria Dendrinou, Alessandro Speciale, Samuel Dodge and Zoe Schneeweiss.

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

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