Brussels Edition: Recession Fears, Balkan Dreams, Trade Spats

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

Woeful. Bad. Shocking. That’s how European bond investors and strategists describe the latest economic data emanating from the euro area as they once again fear the worst. Money managers across the region are bracing for a recession as growth indicators flash red. The ECB is doing all it can, but it will likely take a wave of government spending – particularly from Germany – to lift the region’s economies. 

What’s Happening

Brexit Latest | As Boris Johnson heads back from New York to pick up his battered Brexit strategy after a damning rejection of his suspension of parliament, EU diplomats in Brussels today will take stock of the latest British proposals for an orderly withdrawal agreement. The U.K. has sent a fourth set of informal options to the European Commission, laying out alternative arrangements to the Irish border backstop post-Brexit.

WTO Spat | Trade lawyers from the U.S. and Europe will spar again in Geneva today over the legality of the EU's tariffs on $3.2 billion worth of American goods like motorcycles, bourbon whiskey and denim jeans, in retaliation for Donald Trump’s levies on European steel and aluminum. While a decision is expected next year, the World Trade Organization is poised well before that to give Trump the authorization to hit Europe with tariffs over illegal subsidies to Airbus.

Balkan Dreams | North Macedonia and Albania have been promised an answer by next month whether the EU is willing to open accession negotiations with them. While the EU’s draft communique – seen by Bloomberg – is full of praise for Skopje (less so for Tirana), the part on whether to actually start the process is left blank and diplomats meeting today to discuss it will probably pass the hot potato to ministers.

Tourist Trap | Europe’s tourist hot-spots are bracing for the impact of the collapse of Thomas Cook, which is threatening to take down with it a large chunk of the industry it spawned. Destinations on the continent face unpaid bills, falling hotel occupancy and a drop in visitor numbers as they struggle to find other service companies to fill the gap. Meanwhile, the company’s airline Condor is getting a bridge loan of 380 million euros ($420 million) from the German government to remain in business. That deal – announced last night – still needs European Commission approval.

Italian Plan | With weeks to go until the deadline for Italy to submit its plans to Brussels, the country’s 2020 budget is still in flux. But there is one certainty: there won’t be a repeat of last year’s battle with the EU. While plenty of back-and-forth is expected, both sides are keen for a smooth compromise in the first real test for Prime Minister Giuseppe Conte’s new pro-European stance.

In Case You Missed It

Ukrainian Nightmare | For the second time in as many years, a major political scandal related to U.S. presidential-election campaigns has traced its way back to Ukraine, a country riven by tensions between Russia and the West and weakened by systemic corruption. Here’s why the Eastern European nation of 42 million is at the epicenter of an impeachment storm engulfing president Trump.

Split Decision | Starbucks won while Fiat Chrysler lost court fights over EU tax orders in conflicting decisions ahead of Apple’s bid to topple its record 13 billion-euro bill. Lawyers are expected to pore over the judgments ahead of multiple other appeals as companies, including Apple, rail against EU competition chief Margrethe Vestager’s five-year crackdown on allegedly unfair tax deals.

Forget-Me-Not | Google won an EU court battle against plans to impose a global “right to be forgotten” in the latest ruling over where to draw the line between privacy and freedom of speech. European authorities could nonetheless still order a link to be removed on all versions of a search engine after balancing privacy rights versus the right to freedom of information, the ruling said.

ECB Dissent | The depth of division at the ECB was exposed again as Bank of France Governor Francois Villeroy de Galhau admitted he opposed the decision to restart QE, just a day after President Mario Draghi warned that public dissent by policy makers could weaken the impact of recent monetary stimulus. It could also make it hard for incoming chief Christine Lagarde to rally support if more radical measures are needed.

Dictator Exhumed | Spain’s Supreme Court rejected a bid by Francisco Franco’s family to block the transfer of the late dictator’s remains from a mountainside mausoleum to a cemetery outside Madrid, handing a victory to the ruling Socialist party. Here’s why the decision is a boost for acting Prime Minister Pedro Sanchez as he gears up for yet another election in November, Spain’s fourth in as many years.

Chart of the Day

Spain’s central bank cut its economic growth forecasts, an acknowledgment that even one of the euro region’s fastest growing economies isn’t immune to the uncertainty that’s gripped the global economy. The central bank blamed the forecast cuts on weaker-than-expected job growth across most sectors and heightened global uncertainty stemming from Brexit negotiations and trade tensions, which has hit investment. 

Today’s Agenda

All times CET.

• 11 a.m. Israeli Minister of Strategic Affairs and Public Security Gilad Erdan gives press conference in Brussels on delegitimization of Israel and anti-Semitism

• EU trade chief Cecilia Malmström meets with New Zealand Prime Minister Jacinda Ardern in New York; participates in the Bloomberg Global Business Forum

• ECB's Benoit Coeure speaks at event on risk-free rates, public hearing on digital currencies

• German Finance Minister Scholz speaks to Bundestag

--With assistance from Nikos Chrysoloras.

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