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Brussels Edition: The Italian Quandary

Brussels Edition: The Italian Quandary

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

Even as the coronavirus seems to be loosening its deadly grip on Italy, one of the principal worries of the founders of the euro is materializing:  the finances of the common currency’s third-largest economy are largely dependent on support from the ECB and the rest of zone — whether the Germans and the Dutch like it or not. Complicating matters, Rome’s political resolve to play ball with its partners is beginning to show cracks, while the country’s depressed south is turning into a powder keg. Next Tuesday’s call between euro-area finance ministers to find a structured way to contain the outbreak’s economic fallout and support the region’s recovery may prove crucial, especially since any such plan would need the backing of a furious Italian government.

What’s Happening

Money Talks | As G-20 finance chiefs hold another call today on the coronavirus outbreak, the EU’s top brass together with Christine Lagarde and Mario Centeno will seek ways to cushion the economic impact of the pandemic. Meanwhile, EU finance ministers have been asked to draw up proposals next week to tackle the ramifications of higher debt burdens and potential regional fragmentation.

Democracy Fading | Hungarian Prime Minister Viktor Orban now has parliamentary approval to rule by decree indefinitely. The belief that restraint will be exercised is running low, after the nationalist leader used his supermajorities to dismantle checks and balances, build a massive state propaganda machine and crack down on civil society to silence dissent.

Inflation Reading | A slump in oil prices sent euro-area inflation tumbling in March, data due today is set to show. While a rate closer to zero would normally spark renewed discussion about an extra dose of monetary stimulus, economists — and maybe even policy makers — might just shrug off this month’s reading as an inevitable consequence of the region’s deepest crisis since World War II.

Tighter Controls | European governments are tightening restrictions to contain the virus and are preparing people for a prolonged period of severe disruptions and minimal social contact. There are signs of progress though. The number of new infections in Italy and Spain continued to ease, and the WHO says the pandemic may be approaching its peak on the continent.

In Case You Missed It

Soured Sentiment | Economic sentiment in the euro area plunged the most on record after the furious spread of the coronavirus shuttered businesses in vast parts of the region, and prospects dwindled that life will return to normal any time soon. The mood  is worsening in all sectors, along with the view of future demand and employment. 

No Dividends | Germany’s listed companies will be asked to suspend dividend payments to qualify for assistance designed to ease the impact of the coronavirus crisis. As the fallout spreads, companies across Europe are coming under increased pressure to defer shareholder payouts to preserve cash. 

Bulgarian Setback | Bulgaria’s plan to join the euro area hit a road block, with the central bank saying the coronavirus crisis had rendered targets to integrate deeper this year “unrealistic.”  It’s the latest setback in efforts by the bloc’s poorest member to join both the ERM-2, known as the waiting room for the euro area, and the euro-area’s banking union by July.

Same Error | Chinese experts who traveled to Italy to help with the crisis say the European nation is making the same mistakes that doctors in Wuhan made in the early stages of the outbreak. Here’s why.

Die Standing | The borders are open, people are visiting their favorite cafes, and parks are full of families. Europe’s most authoritarian state is taking a more laissez-faire approach to the pandemic. “Better to die standing,” its strongman says. 

Chart of the Day

Brussels Edition: The Italian Quandary

The German government’s economic advisers predict that the coronavirus pandemic will give the nation its worst recession since the global financial crisisThe group said traditional stimulus measures to boost short-term economic activity aren’t promising since lockdowns to contain the disease have brought large parts of public life and business to a standstill.

Today’s Agenda

All times CET.

  • 11 a.m. Eurostat to release flash estimate for inflation in the euro area for March
  • 1 p.m. G-20 finance ministers call 
  • 3 p.m. Council President Charles Michel holds video conference with ECB’s Lagarde, Eurogroup’s Centeno and Commission President Ursula von der Leyen
  • Eurostat to release data on healthcare expenditure of EU member states

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