Brussels Edition: On the Edge, German Stimulus, Liberal Scalp

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

As Europe’s economy shows mounting warning signs — from weak manufacturing data to a slowdown in inflation — the European Commission will today discuss two things that could push it over the edge of recession: Brexit and trade wars. Boris Johnson is poised to issue an ultimatum to the EU today: negotiate Brexit on his terms within the next nine days, or face a no-deal divorce, raising the specter of a chaotic exit from the bloc. Meanwhile on the transatlantic front, matters look equally gloomy, with the U.S. set to announce fresh tariffs on European goods. As far as downside risks go, these seem uncomfortably close to materializing. 

What’s Happening

German Stimulus | Officials in Angela Merkel’s government have already drawn up a raft of options to stimulate the economy, and some are already being rolled out, according to people with direct knowledge of the plans. Among the possible steps: more subsidies for electric cars, broader corporate tax write-offs, and support for consumer spending by phasing out the so-called solidarity surcharge.

Liberal Scalp | Sylvie Goulard, the EU’s nominated digital chief, may be in for a tough hearing today. The bloc’s major center-right and center-left political families already lost a commissioner candidate each, and Goulard — a prominent Liberal candidate and France’s own pick — may be just the high-profile scalp EU lawmakers want to get even, especially as she faces an ongoing investigation from the EU’s anti-fraud office over alleged misuse of funds. 

Irish Puzzle | The frontier between the Republic of Ireland and Northern Ireland remains the quintessential conundrum of Brexit. Boris Johnson is determined to leave the EU by Oct. 31, with or without a negotiated transition deal. But any departure must take into account the historically fraught Irish border. Here’s all you need to know on why this is such a puzzle. 

ECB Rulings | The EU’s top court will have the final say today in a dispute between the ECB and a French local cooperative bank that challenged the central bank’s direct supervision. Meanwhile, an adviser to the court will give a non-binding opinion in a long-winded spat over access to documents stretching back to a 2014 ECB decision that obliged Banco Espirito Santo to repay 10 billion euros in debt to the euro system.

In Case You Missed It

Price Pressures | Euro-area inflation unexpectedly slowed last month, with consumer prices rising an annual 0.9%, less than half the ECB’s goal of just under 2% and below economists’ estimates. The data hand another argument to policy makers who supported the central bank’s recent stimulus package including a decision to cut interest rates further below zero and restart quantitative easing. 

Europe's Bubbles | Munich, Amsterdam, Frankfurt and Paris are the European cities most vulnerable to a property bubble, according to this UBS real-estate report. Imbalances have soared in the euro area because of ultra-low interest rates, with prices becoming unsustainable.

Cookies Cut | EU rules require people to actively choose to allow companies to install tracking cookies, judges said in another key ECJ ruling on privacy. The judgement comes as users’ consent has become more of a sensitive issue following a string of privacy scandals with companies now risking hefty fines for inadequately informing users about what data they collect and for what purposes.

Catalan Warning | Spain’s acting Prime Minister Pedro Sanchez warned Catalan nationalists not to encourage violent protests when the trial of separatist leaders concludes. Sanchez spoke as Spain is entering a tense period ahead of elections on Nov. 10 and as protesters in the region marked the second anniversary of an illegal referendum that provoked a crackdown from Spanish riot police.

Chart of the Day

The World Trade Organization cut its global trade growth forecast for this year to the weakest level in a decade, warning that further rounds of tariffs in an environment of heightened uncertainty could spark a “destructive cycle of recrimination.” The volume of merchandise trade will increase by 1.2% this year and 2.7% next year, after a 3% advance in 2018. The outlook marks a sharp downgrade from the WTO’s previous projections in April.

Today’s Agenda

All times CET.

• 2:30 p.m. Confirmation hearing for Goulard in EU Parliament
• 3:30 p.m. Council President Donald Tusk meets Latvian Prime Minister Krisjanis Karins
• Trade Chief Cecilia Malmstrom to debrief commissioners on ongoing WTO discussions on Boeing/Airbus
• Chief Brexit negotiator Michel Barnier to debrief commissioners on latest developments
• Commission chief Jean-Claude Juncker receives Bridge-Builder Award from the American Chamber of Commerce
• Antitrust chief Margrethe Vestager gives speech on digital markets to consumer advocate conference in Brussels
• ECJ rules in a dispute brought by a French local cooperative bank over ECB direct supervision
• ECJ gives non-binding opinion in appeal by the ECB against a court decision in favor of Espirito Santo Financial Portugal
• EBF European Banking Summit in Brussels
• Finnish President Sauli Niinisto meets U.S. President Donald Trump in Washington

--With assistance from Nikos Chrysoloras and Stephanie Bodoni.

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

©2019 Bloomberg L.P.