Brussels Edition: Path Dependency to Disaster

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

The EU is terrified of another migrant wave, and while that’s been driving its policy on Turkey and Libya, the bloc may need to expand its list of concerns. President Recep Tayyip Erdogan just announced he will issue hydrocarbon licenses in the Eastern Mediterranean and start exploration work, potentially in waters that Greece claims as its own under UN law. For Athens, that would cross the line, and another EU Summit statement or a diplomatic protest may not cut it. Greek Prime Minister Kyriakos Mitsotakis could be left with little choice than to intercept Turkish drillships, or risk political suicide. And then what? Those who recall January 1996 know that bad things don’t always happen by design. It only takes a miscalculation or an overplayed hand for path dependency to lead to disaster.

What’s Happening

Trade Swipe | The EU’s new trade chief came out swinging on an inaugural visit to Washington, saying Donald Trump’s tariff threats amount to short-sighted electioneering and warning about economic damage from protectionism. Phil Hogan told Bloomberg that the race is on to avert an escalation in transatlantic commercial tensions as a result of U.S. objections to a French digital-services tax and talks in coming days could be crucial.

Davos Pressure | Everybody who’s anybody in Brussels will join celebrities, financiers and world leaders in Davos next week to discuss how to resolve the world’s problems at a meeting that will itself leave a carbon footprint the size of a mountain. This year’s World Economic Forum will seek to give concrete meaning to “stakeholder capitalism,” amid increasing pressure to go beyond good intentions and greenwashing.

AI Rules | The EU is mulling new legally binding requirements for developers of artificial intelligence and is considering tweaking other legislation, in an effort to ensure new tech is used in an ethical way. The Commission is set to propose the new rules to apply to “high-risk sectors,” such as healthcare and transport, and suggest the bloc updates safety and liability laws, according to a draft of a “white paper” obtained by Bloomberg.

ECB Therapy | If European Central Bank officials use their review of monetary policy this year as a chance to connect with ordinary people, they need to be ready for some plain truths. Citizens may be less convinced than central bankers that prices are rising too slowly, so if Christine Lagarde consults them and takes their views seriously, that could conceivably put the ECB on a different path from its ultra-accommodative stance.

Greek Leadership | Back in Greece, top judge Aikaterini Sakellaropoulou is set to be elected the Republic’s first-ever female president as soon as next week. While largely a ceremonial post, the pick of non-partisan Sakellaropoulou as head of state offers Mitsotakis some good publicity after widespread criticism about the meager representation of women in his cabinet.

In Case You Missed It

Russian Premier  | He’s an amateur musician, loves ice hockey and revolutionized a tax collection system that many thought could not be fixed. Here’s everything else you need to know about Mikhail Mishustin, the obscure technocrat entrusted by Vladimir Putin to revive Russia’s flagging economy, as the country prepares for the most significant constitutional overhaul in a generation.

Car Rebound | Europe emerged as a bright spot for the embattled global auto industry after car sales jumped to a record in December, but it could be short-lived. The rebound was fueled by exceptional gains in France, Sweden, and the Netherlands ahead of changes in taxation. By pulling forward buying, the changes could sap demand heading into 2020.

Orban’s Exit | Hungarian Prime Minister Viktor Orban moved closer toward exiting the EU’s biggest political group after it approved a resolution demanding intensified efforts to rein in his perceived democratic backsliding. In a joint resolution on Hungary and Poland, backed by most center-right MEPs, the European Parliament said that EU probes into the rule of law in both countries haven’t resulted in improvements.

Spying Spies | An Italian entrepreneur created powerful spyware to help police and intelligence agencies track criminals using encrypted communication such as  WhatsApp and Signal. The problem? Its employees illegally hacked the phones of hundreds of innocent Italians, while the company also struck a deal with a company with alleged links to the Mafia. Here’s the incredible story.

Chart of the Day

EU companies increasingly provide staff with phones, tablets or laptops for when they aren’t in the office and more than two thirds of them did so last year. Nordic countries have the most work devices, with close to 90% or more of staff in Finland, Denmark and Sweden able to email and access the web on the go courtesy of bosses.

Today’s Agenda

All times CET.

• 11 a.m. Eurostat publishes December inflation (HICP) data
• EU antitrust chief Vestager in Copenhagen, participates in the Raeson political salon interview on stage

--With assistance from Sotiris Nikas and Paul Tugwell.

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net, Iain Rogers

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