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Brussels Edition: Midnight Wrangle

Brussels Edition: Midnight Wrangle

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

Europe’s fault lines were laid bare in the wee hours of Friday: on things big, such as the pace of transitioning the continent’s economies to climate neutrality, and on things not so big, such as splitting the bloc’s key jobs between political factions. EU leaders will return to Brussels on June 30 to seek a deal on who will lead the Commission and the European Central Bank. But in the grand scheme of things, what may matter most is that Europe risks showing up at a key United Nations climate summit in New York in September without a common position, and without having set an example for the rest of the world.

What’s Happening

Euro Summit | EU leaders will reconvene today to discuss the latest on the bloc’s efforts to shore up the euro area, including changes to its bailout fund and a deal last week to set up a euro-zone budget. But with the question of financing left unanswered, the talks will probably yield nothing more than lukewarm noises about continuing  to work on the tool.

Johnson vs Hunt | Boris Johnson, the public face of Brexit, will fight Foreign Secretary Jeremy Hunt to become Britain’s next prime minister in a critical contest for the country and the EU. They will spend the next month battling for votes among the 160,000 grassroots members of the ruling Conservative Party, before the winner is announced in late July.

Euro-Area Health | The results today of a survey of euro-area purchasing managers will provide a glimpse into the region’s private-sector health at the end of the second quarter. Concern is growing in markets and even at the European Central Bank that the services sector won’t be able to withstand a broader manufacturing slump.

Swiss Spat | Strained relations between Switzerland and the EU are threatening to affect trading in Swiss stocks. The two sides are at odds over a political accord, and the Swiss stock exchange has effectively become a bargaining chip, while Brexit means Brussels is unlikely to grant any concessions. Here’s how the spat could play out in the markets.

In Case You Missed It

Italian Standoff | Italy’s bid to avoid EU disciplinary action looks more daunting than ever. The stickiness of its economic woes complicates the government’s efforts to meet its fiscal commitments, despite assurances it sent the EU in a letter that was long on rhetoric but short on detail.

Turkish Warning  | EU leaders escalated a threat to sanction Turkey over its offshore drilling in the eastern Mediterranean region claimed by Cyprus, vowing to consider punitive measures against the companies and individuals involved. Leaders also renewed until June 2020 a package of penalties on Russia’s financial, energy and defense industries for encroaching on Ukrainian territory.

Tax Clawback | The U.K. is fighting an order by EU antitrust chief Margrethe Vestager to claw back allegedly illegal tax breaks from multinationals, adding to the list of potential flashpoints ahead of Brexit. The challenge marks the start of at least two years of legal quarreling in courts whose reach the U.K. was keen to escape with its withdrawal from the bloc.

Iceland Troubles | The collapse of Wow Air is sending ripples through Iceland, whose recovery from financial turmoil a decade ago was built largely on attracting foreign tourists. Visitor numbers fell 24% in May and the summer season looks  shaky. After 20 quarters of uninterrupted growth, Iceland is bracing for a sharp downturn.

Quiz Answer | The top euro-zone official who wrote spicy novels under a pen name in his student days is none other than French Finance Minister Bruno Le Maire. Mon dieu!

Chart of the Day

Brussels Edition: Midnight Wrangle

Italy’s economy probably shrank again this quarter, according to the country’s statistics office, complicating the populist government’s efforts to meet its fiscal commitments. A contraction in the three months through June would be the third in less than a year, highlighting the perilous state of the euro area’s third-largest economy.

Today’s Agenda

All times CET.

  • 8:30 a.m. EU Council president Tusk meets European Central Bank President Draghi; at 9 a.m., Tusk meets Finland Prime Minister Rinne

  • 9:30 a.m. EU leaders meet in Brussels, to discuss the deepening of Economic and Monetary Union

  • 10 a.m. Euro-area flash PMIs

  • 11 a.m. Eurostat publishes data on structure of government debt

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

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