Brussels Edition: All Eyes on Draghi

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

The European Central Bank’s policy meeting today — Mario Draghi’s penultimate one before he hands the reins over to Christine Lagarde — could be tense. Investors want Draghi to go out with a bang, taking interest rates even further below zero and resuming bond buying. But a sizable group of policy makers is opposed to a grand stimulus package and skeptical that quantitative easing is necessary. They argue that the economy isn’t weak enough yet, with U.S. trade tariffs on European goods and a chaotic Brexit seen as possible clouds on the horizon.  

What’s Happening

Fog Over Channel | EU diplomats in Brussels will take stock of the latest elements in the stalled Brexit negotiations this morning, as every day that goes by plunges the U.K. deeper into constitutional chaos. With even Boris Johnson’s government warning of the potential for  food and fuel shortages without a deal, one wonders what the European Parliament’s president may have to say later that can offer any reassurance ahead of next month’s scheduled exit day.

New Faces | While investors speculate on what a potential ECB presidency under Lagarde would be like from November, more than a third of the Governing Council will also change this year — with the search for Benoit Coeure’s successor set to start as soon as this week. That is bound to make it more challenging for investors to assess how the central bank will react to economic events.

Team Building | Incoming Commission President Ursula von der Leyen’s new college of commissioners will be off on a bonding day today so they can get to know each other and start work on a friendly footing. But with European Parliament hearings around the corner and lawmakers known to claim a scalp or two, there’s no guarantee that all the members of the new team will make it through. 

Vaccination Conference | Fake news is killing people. Vaccine hesitancy has led to a surge in often fatal — and totally preventable — diseases, including measles. Commission President Jean-Claude Juncker will open a global vaccination conference in Brussels today to discuss the epidemic of disinformation — for which, unfortunately, no effective treatment has been found.

In Case You Missed It

No Stimulus | Angela Merkel rejected growing calls at home and abroad to fend off a crisis with increased spending, saying that the problem wasn’t a shortage of money for investment. That’s what she told parliament, just a day after Finance Minister Olaf Scholz said Germany would stick to a balanced budget but was ready to act in a crisis.

Loosen Up | Forget German frugality. Sweden’s successive surpluses have reduced the country’s debt level to the lowest since the late 1970s, an austerity that has forced the central bank to hold rates below zero for years to support growth. With the economy now cooling and the Riksbank all but tapped out, clamor is growing for the government to loosen the purse strings, echoing calls to Berlin.

Silver Lining | At least someone seems to be benefiting from the Brexit mess. Britons may be fed up with the uncertainty but their indecision has boosted an economy on the opposite side of the EU. Lithuania upgraded this year’s growth forecasts yesterday, citing the delay in the U.K.’s exit from the bloc — and the lack of resulting disruption — as the main reason for the rosier outlook.

Death Threats | France’s finance and budget ministers have received death threats, including bullets in the post, in the latest sign of a tense political climate after the Yellow Vest protests and attacks on the offices of the French president’s political party. The threats underscore lingering discontent in some corners even as the movement weakens. 

Chart of the Day

It has been more than a decade since the financial crisis wreaked havoc on economies around the world, but many countries are less capable of absorbing shocks now than they were back then. Of the 31 economies tracked by a new gauge from the Swiss Re Institute and the London School of Economics, about 80% had lower resilience scores in 2018 compared to 2007. 

Today’s Agenda

All times CET.

• 9 a.m. Juncker delivers opening speech at Global Vaccination Summit in Brussels
• 9 a.m. EU diplomats in Brussels meet to discuss Brexit
• 11 a.m. Eurostat to release industrial production reading for July
• 2:30 p.m. Mario Draghi press conference following ECB policy meeting
• EU financial services chief Valdis Dombrovskis in Helsinki delivers a keynote speech at the Eurofi Financial Forum 2019
• EU Parliament President David Sassoli gives press conference on Brexit

--With assistance from Ian Wishart.

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

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