Brussels Edition: The Blacklist

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

The European Commission is about to finalize an updated blacklist of countries it says have insufficient safeguards against terrorism financing and money laundering. We’ve been told that the latest draft circulated singles out 23 jurisdictions, including Saudi Arabia, Panama and the U.S. Virgin Islands. Once adopted, the list will force EU banks and financial institutions to beef up their due diligence when they do business in these countries, potentially adding another thorn in EU-Saudi ties following the murder of journalist Jamal Khashoggi, as well as tensions over Yemen and Iran.

What’s Happening

Looking East | The EU may be jittery about U.S. protectionism, but on Friday the bloc will cheer the removal of trade barriers as its landmark deal with Japan takes effect. The free-trade agreement is Europe’s biggest to date, eliminating virtually all tariffs between the two partners, expanding markets for services and public procurement and bolstering regulatory cooperation.

Economic Malaise | Looking ahead to next week, industrial data from Germany, along with services PMIs from Italy and Spain and the final such readings for the region, will provide further detail on the health of the euro-area economy after a torrid end to 2018. The Commission will also publish its quarterly forecasts on Feb. 7.

Rail Merger | The highlight of an otherwise quiet week ahead will be the Commission’s expected blocking of the controversial Siemens-Alstom rail merger. Despite immense political pressure from Paris, Berlin, the companies and even some of her colleagues, EU antitrust guardian Margrethe Vestager doesn’t appear willing to budge.

Vestager’s Hunt | And Vestager’s not done there. After brushing off governments and rail giants, her people are going after big bad banks. Eight lenders are being targeted in a probe that alleges traders colluded to acquire and trade euro government bonds. The case comes  a month after EU regulators implicated lenders in a separate bond-trading investigation.

Huawei Warning | China is trying to take control of Western data and networks, according to the U.S. ambassador to the EU. It was the latest warning from Washington that its allies should think twice before using equipment from companies such as Huawei Technologies.

In Case You Missed It

Brexit  Fog | You may have noticed that we didn’t flag any Brexit-related events for next week, even as the clock ticks down to March with no deal for an orderly withdrawal in sight. That’s because nothing will happen, and — as far as the EU is concerned — there’s not much to talk about, since the deal struck last month is not up for renegotiation. Everyone, from hotels in Mykonos to French harbors, is preparing for the worst.

Iran Plan | After a long delay, three key European powers finally unveiled a plan to help companies trade with Iran, in a move intended to salvage a fragile nuclear accord with the Islamic republic, in defiance of  President Donald Trump’s sanctions. The question is, of course, whether any companies will dare use the so-called  Instrument for Supporting Trade Exchanges, and risk Trump’s ire.

Sanctions Threat | The EU said it will consider hitting Venezuela with a new round of targeted sanctions if it doesn’t take immediate steps toward a fair democratic process. The aggressive posture complements the creation of a so-called international contact group made up of the EU and Latin American and European countries.

Jupiter Ascending | Emmanuel Macron’s approval ratings have picked up, the Yellow Vest protests are waning and his party has overtaken Marine Le Pen’s anti-EU movement in polls ahead of the European elections. That’s quite a turnaround for the French president, one few could have foreseen last year.

Chart of the Day

Brussels Edition: The Blacklist

Italy fell into recession at the end of 2018, capping a year of political turmoil, higher borrowing costs and fiscal tensions that took their toll on the economy. While the recession may prove short-lived, the latest bad news is likely to test market confidence in the government’s expansive program for 2019.

Today’s Agenda

All times CET.

  • 8 a.m. EU foreign ministers continue informal meeting in Bucharest, followed by press conference around noon
  • 11 a.m. Eurostat to publish flash estimate on January euro-area inflation
  • Weekly cabinet meeting of Belgian federal government

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