Brussels Edition: Taking a Bite Out of Apple

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

The world’s biggest tax case pits Apple and Ireland on one side and the European Commission on the other. During a two-day hearing at the EU General Court in Luxembourg starting today, the iPhone maker is fighting an EU order to stump up some 13 billion euros in taxes it allegedly dodged thanks to a special deal with Dublin. The final outcome, which could take months, is likely to set the tone for Competition Commissioner Margrethe Vestager’s new term and could empower or halt her tax probes.

What’s Happening

Prorogation Question | Boris Johnson’s Brexit strategy has been on trial ever since he became prime minister, and today his lawyers will defend it in the U.K.’s highest court. Fresh from being lambasted by a fellow European leader after he opted out of a joint news conference yesterday, Johnson will see his decision to suspend Parliament under scrutiny in three days of hearings at Britain’s Supreme Court.

Dutch Shift | The Dutch government is expected to end an era of debt reduction in favor of stimulus when it unveils its budget plans today, leaving Germany looking increasingly isolated. Its 2020 budget may include the establishment of a national investment fund worth tens of billions of euros to take advantage of historically low rates. 

Final Hurdle | As Christine Lagarde looks set to get the EU Parliament’s nod today to become the next ECB President, the question is whether she’ll stick to her predecessor’s policy line, like many expect. While Mario Draghi claimed broad consensus for the recent stimulus, measures were opposed by governors representing more than half the population and economic output of the euro region.

Spanish polls | Spain’s King will wrap up talks with the country’s main political leaders today in order to gauge the chances of a stable government being formed. With no evident breakthrough so far, he may come to the conclusion that acting Prime Minister Pedro Sanchez won’t be able to form a government, meaning Spaniards will be forced to head back to the polls in November.

In Case You Missed It

Fresh Levies | Despite European efforts to avoid an escalation in trade tensions with the U.S., a tit-for-tat tariff battle over illegal aircraft subsidies is in the offing. While the EU is seeking to avoid fresh levies, Washington isn’t willing to negotiate, the EU’s trade chief said. A decision by the WTO allowing the U.S. to slap tariffs on billions of European exports is expected later this month.

Renzi Split | Former Italian Prime Minister Matteo Renzi is leaving the Democratic Party to found his own movement, but pledged continued support for Prime Minister Giuseppe Conte, according to reports from Italian media outlets. The former leader of the Democrats is set to announce his move as early as today.

Taxing Flights | Germany’s main political parties are coalescing around proposals to increase the cost of flying, potentially doubling taxes on short-haul flights to slash greenhouse gas pollution. Endorsing the policy would add to momentum within Europe to hit the aviation industry with stricter emissions rules and could alter the competitive landscape between Lufthansa and low-cost carriers. 

QE Limits | The ECB has the scope to buy bonds as part of its monetary stimulus for quite a while before hitting self-imposed limits, according to its chief economist, Philip Lane, who elaborated on what Mario Draghi said last week. Lane’s remarks signal that there’s no imminent danger of reaching buffers previously set by officials to ensure quantitative easing can’t resemble monetary financing.

Tax Probes | AB InBev is among 39 firms targeted by fresh Commission investigations into Belgian tax deals after an earlier order to recoup about 800 million euros was criticized by the EU’s General Court. Starting new probes in a case Brussels thought it had wrapped up in 2016 shows Vestager’s determination to push on with a corporate crackdown.

Chart of the Day

The record spike in oil after an attack on a Saudi Arabian facility is yet another signal for the EU’s energy chief that the bloc should walk away from fossil fuels and become climate-neutral. In an interview with Bloomberg TV, Miguel Arias Canete said the EU should diversify energy sources to cope with such shocks and reiterated the need to fight global warming and have intelligent climate policies.

Today’s Agenda

All times CET.

• 12 p.m. Lagarde expected to be recommended to become ECB president by the plenary of the European Parliament, which will also debate the ECB’s role in EU economic policy
• College of EU Commissioners meeting
• Commission President Juncker meets Parliament President Sassoli in Strasbourg
• Apple, Ireland and the European Commission will face EU court judges in their challenge of Apple’s record 2016 fine
• U.K. Supreme Court hearings begin on the challenge to Johnson’s suspension of Parliament
• ECB’s Coeure, Lane speak at Central Bank of Luxembourg event
• Finland’s government starts discussions on 2020 budget

--With assistance from Jonathan Browning.

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

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