Brussels Edition: Italian Detente

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

Italian Prime Minister Giuseppe Conte heads to Brussels today to meet top officials and forge what he promises will be warmer ties with the EU. With Italy’s proposed commissioner Paolo Gentiloni snagging the powerful economy post, Conte’s government is hoping for a less turbulent relationship with the European Commission. Gentiloni will be tasked with ensuring EU fiscal limits are respected, but his appointment will reignite speculation that the commission will consider overhauling a rulebook that countries including Italy have said is too rigid.

What’s Happening

Back Again | Is Britain slowly coming round to the idea of a Brexit deal that would see only Northern Ireland remain subject to the customs and single market rules of the “backstop,” rather than the whole of the U.K? On both sides of the Channel there are people who think so, even though Boris Johnson’s government has denied it. His envoy David Frost might drop a few hints when he resumes talks today with commission officials.

Spending Plea | Germany is facing a fresh call to loosen its purse strings and address economic challenges now, this time from the International Monetary Fund. Meanwhile, Finance Minister Olaf Scholz told parliament Tuesday that Germany is sticking to a balanced budget but is ready to deploy “many billions” should it — and the wider European economy — head into recession.

Bank Pain | European lenders including Deutsche Bank and UBS are bracing for another blow to their profitability from the European Cental Bank — which begins a two-day policy meeting Wednesday — after five years of sub-zero monetary policy. While the ECB’s strategy is to boost growth and inflation by lowering borrowing costs for companies and households, squeezing banks too much could hamper their ability to supply the credit that fuels the economy.

Saving Earth | The EU is getting ready to confirm its leading role in the global fight against climate change at a United Nations summit later this month, and commissioners will discuss preparations for the gathering today. The EU has pledged to cut greenhouses gases by at least 40% by 2030 under the Paris deal, and the bloc is currently considering going climate-neutral by 2050.

In Case You Missed It

New Team | The European Commission named its new policy team responsible for navigating a raft of threats from U.S. protectionism and tech monopolies to homegrown populists and sluggish growth. Emmanuel Macron’s growing influence was clear, as a new commission prepares to take office that’s in tune with his top priorities. Meanwhile, the competition portfolio stayed with Margrethe Vestager, who was also put in charge of digital affairs. Here are the other team members you need to know.

Trade Chief | Ireland’s Phil Hogan is set to be the EU’s next trade commissioner, an appointment that puts the bloc’s relationship with the U.K. right at the heart of policy making. Naming Hogan to helm trade talks with post-Brexit Britain suggests incoming chief Ursula von der Leyen considers fostering relations with its departing member a priority.

Penalties Risk | Spanish banks risk having to pay billions of euros in compensation for the way they sold mortgages linked to an index published by the Bank of Spain, according to an advisory opinion from the EU’s top court. The court said the bloc’s consumer protection rules apply to the way banks explain how interest rates are fixed in mortgage contracts. A final opinion is expected in a few months.

Serbian Ties | Serbia’s plan to join a Russian-led economic bloc is angering the EU, which the Balkan country says it wants to join. The commission has made clear that Serbia will have to cancel any bilateral trade agreements with other countries if it becomes a member. Serbian officials have ignored the bloc’s instructions and will sign a deal to join the Eurasian Economic Union next month.

Chart of the Day

Today’s Agenda

All times CET.

• 11:30 a.m. EU Council President Tusk meets Italy’s Conte

• 4 p.m. EU Commission President Juncker hosts Conte, who also meets president-elect Ursula von der Leyen

• EU trade chief Malmström at Bruegel Institute event in Brussels on the EU-Singapore trade agreement

• U.K. envoy Frost in Brussels, holds meeting with commission officials

• EU climate chiefs Sefcovic and Canete brief on preparations for the UN Climate Action Summit
   

--With assistance from Ian Wishart, Michael Winfrey and Ewa Krukowska.

To contact the editor responsible for this story: Emma Ross-Thomas at erossthomas@bloomberg.net, Iain Rogers

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