Brussels Edition: Back to EU

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

The Brexit ball is back in Brussels’s court, whether officials want it or not. Facing heavy losses at home, U.K. Prime Minister Theresa May withdrew a parliamentary vote and said she’ll seek “assurances” on the thorny Irish backstop arrangement at this week’s summit of EU leaders. European Council President Donald Tusk responded by calling a Brexit meeting for Thursday, where at most May will get a discussion on “how to facilitate ratification” — but no new deal. May has an emergency meeting with German Chancellor Angela Merkel today in Berlin to discuss possible next steps. On both sides of the table, plans are being ratcheted up for the no-deal scenario.

What’s Happening

ECB Ruling | Did the European Central Bank overstep its mandate when it set up a quantitative-easing program to stave off deflation? The EU’s top court will answer that question for good today in a ruling that comes just as the ECB is planning to phase out the tool after three years and 2.6 trillion euros ($3 trillion) of bond purchases. Germany’s Federal Constitutional Court last year sought the EU judges’ guidance in a series of challenges by opponents who accused the Frankfurt-based central bank of having engaged in “opaque and omnipotent activities.”

Vodafone Probe | Vodafone is set to get an in-depth probe by the European Commission into its plan to buy Liberty Global’s assets in Germany and eastern Europe. The deal will double its cable footprint in Germany and allow it to scale up, offering customers a combined bundle of services. Deutsche Telekom CEO Tim Hoettges, who has the most to fear from a stronger rival, has complained that Vodafone will have a monopoly over parts of Germany’s TV market that could even risk democracy. Vodafone CEO Vittorio Colao has rebuffed his comments as sour grapes.

Summit Preparation | European affairs ministers will gather in Brussels today to finalize the conclusions for this week’s leaders summit. These will include words on migration, security and defense, climate change and disinformation, according to a draft seen by Bloomberg — although wording on more controversial issues such as Russia’s clash with Ukraine in the Sea of Azov remains blank. The ministers will also hold a hearing on the rule of law in Poland and exchange views on respect for EU values in Hungary. 

In Case You Missed It

Macron’s Address | French President Emmanuel Macron admitted he’s lacked sensitivity to the concerns of regular people and promised a raft of new spending as he sought to draw a line under the month-long Yellow Vests crisis roiling France. His concessions: urging companies to pay workers a year-end bonus that won’t be taxed, ending levies on overtime, government funding for a 100-euro-a-month increase in the minimum wage and abolishing a controversial tax on pensions below 2,000 euros a month.

Italy’s Leverage | Italy’s government may use the Gilets Jaunes as ammunition in its budget spat with Brussels. Deputy premier Matteo Salvini warned European partners that the country’s social stability could be at risk if Brussels pushes back too hard against its 2019 spending plans. Prime Minister Giuseppe Conte is seeking leverage for talks this week with European Commission President Jean-Claude Juncker. 

Sagging Confidence | Euro-area investor confidence declined for a fourth month in December, with expectations for economic prospects plunging to the lowest since 2012. The report is the latest in a raft of numbers pointing to decelerating growth, further complicating the ECB’s decision as it prepares to cap stimulus.

Norway Model | With the U.K. Parliament balking at May’s Brexit deal, Norway’s arrangement with the EU is getting another look. It’s a model that might just find broader support — at least as a temporary move — until a better answer can be found. Here’s all you need to know about how a Norway model would work. 

Chart of the Day

The euro-area economy saw growth cut in half in the third quarter, with rising risks from global trade conflicts and weakening momentum casting a shadow over the outlook. The European Central Bank will issue new projections on Thursday that will show how prospects for the next three years have changed. Any revisions are nonetheless unlikely to derail policy makers’ plans to halt bond buying later this month — after three years and purchases of 2.6 trillion euros.

Today’s Agenda

All times CET.

• 9:30 a.m. The EU’s top court will rule on the legality of the ECB’s quantitative easing program, in a challenge brought by opponents who say the bank overstepped its powers 
• 9:30 a.m. EU lower court rules on challenge by BTB Holding Investments and Duferco against a 2016 European Commission decision that funding from Belgium’s Walloon government to their units between 2006-2011 violated EU state aid rules
• 10 a.m. EU European affairs ministers meet in Brussels, holding a hearing on the rule of law in Poland and exchanging views on respect for EU values in Hungary. They’ll also discuss the EU’s next multi-annual budget, and finalize conclusions for this week’s EU Summit
• EU Commission President Juncker addresses the European Parliament on European Council preparations
• Vodafone to get extended EU probe into plan to buy Liberty Global’s German fixed-line network 
• EU merger deadlines for Energizer/Spectrum and Quaker/Global Houghton. Both deals are seeking clearance with concessions 

--With assistance from Stephanie Bodoni and Aoife White.

To contact the editor responsible for this story: Heather Harris at hharris3@bloomberg.net, Chad Thomas

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