Brussels Edition: Johnson Greets Von Der Leyen on Home Turf

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

When European Commission President Ursula von der Leyen meets Prime Minister Boris Johnson in Downing Street this evening, it won’t be the substance of the deal that the U.K. and EU hope to strike on their future relationship that will dominate the conversation, but rather how long it will take. Even before talks have begun, von der Leyen has made it clear that she thinks getting an agreement by the end of this year is unlikely. But that’s what Johnson wants. If their meeting is uncomfortable, it will only reinforce the belief that the coming negotiations will be anything but plain sailing.

What’s Happening

Sanchez Succeeds | Socialist leader Pedro Sanchez scraped a victory in parliament to take power for a second term in Spain’s first coalition government since before the 1936-1939 Civil War. Winning by a margin of 167-165, he is relying on the backing of the anti-austerity party Podemos and a Catalan separatist group. Plans include higher taxes on large companies and wealthier Spaniards to help fund increases in social spending and the minimum wage.

Davos Deadline | France and the U.S. will try to hammer out a compromise on the taxation of digital services by the time the World Economic Forum takes place in Davos in a fortnight. Representatives of French products like Le Creuset cookware and Laurent-Perrier champagne made their case to avoid U.S. sanctions in response to a 3% tax France slapped on the likes of Google, Apple, Facebook and Amazon.

Unlikely Friends | As far as strange alliances go, this one’s right up there. Hungarian Prime Minister Viktor Orban, criticized for cronyism and undermining the rule of law, appears to have found an unlikely friend in centrist French President Emmanuel Macron. Orban’s aides see common ground on some of the biggest issues facing Europe, including how to manage relations with Russia and the U.S.

Third Pipeline | Turkish President Recep Tayyip Erdogan and his Russian counterpart Vladimir Putin will inaugurate the TurkStream pipeline in a ceremony today, the third natural-gas link between the two countries. While ties are improving, there is still a risk that they could slip into direct confrontation over Libya.

In Case You Missed It

Austrian Coalition | Sebastian Kurz was sworn in as Austria’s chancellor at the head of the country’s first government to include his conservative People’s Party and the environmentalist Greens. Their program combines Kurz’s trademark hardline stance on migration with an ambitious goal for Austria to become climate neutral by 2040.

Troop Withdrawal | Germany has temporarily moved some troops from Iraq due to safety concerns following the U.S. killing of Iranian general Qassem Soleimani. Of Germany’s 120 soldiers in the country as part of a training mission, 32 have transferred to Jordan and three to Kuwait, according to Germany’s Defense Ministry.

German Cars | German car production fell to its lowest in almost a quarter of a century, a further sign of the pain being wrought by the global trade war. Meanwhile, euro-area inflation climbed to 1.3% in December, the fastest pace in eight months. ECB wonks said that what makes prices rise isn’t so puzzling after all.

Greek Goodbye | After almost a decade, the International Monetary Fund is closing its permanent office in central Athens. Loathed by locals, the fund was one of the “bad guys” in the so-called troika of lenders and led the effort to save Greece from financial turmoil. As the world’s attention turns to another geopolitical crisis, the IMF is finally ready to pack its bags.

Finnish Week | After a slew of international headlines, the Finnish government has denied that Prime Minister Sanna Marin is considering a four-day working week. It said that the idea was only floated “briefly” by the 34-year-old in a panel discussion last August.

Chart of the Day

The European Union has a growing trade surplus with itself, a statistical discrepancy that may indicate value-added tax fraud of more than 60 billion euros ($67 billion) a year, according to a study by two leading German research institutes. The EU’s trade balance with itself should be zero if all transactions are properly reported. But if companies have improperly declared them, and they are in fact domestic, they are not recorded as imports by the partner country and go untaxed.

Today’s Agenda

All times CET.

• 9 a.m. Commission President von der Leyen, foreign policy chief Borrell brief press after special College meeting to debate situation in Middle East
• 12:15 p.m. Von der Leyen speaks at London School of Economics and Political Science
• Commission Vice President Vestager meets Romanian Prime Minister Ludovic Orban in Brussels
• EU diplomats meet in Brussels to discuss framework for post-Brexit negotiations

--With assistance from Nikos Chrysoloras.

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

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