Brussels Edition: To Russia With Love

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

Never mind Brexit. Next week’s summit of European leaders will also be dedicated to security, according to draft conclusions making the rounds. Leaders will give reassurances about their “common resolve to further enhance the EU’s internal security and disrupt hostile activities of foreign intelligence networks.” Their commitment to “protect the Union’s democratic systems and combat disinformation, including in the context of the upcoming European elections” comes in response to allegations of Russian meddling in the bloc’s politics.

What’s Happening

Money Laundering | Leaders will also vow to legislate measures about “access to financial information as well as to better combat money laundering” by May’s elections for the European Parliament — a move that follows calls to build up the bloc’s defenses in the wake of scandals like the one in Denmark. They will also commit to examine extending “the competences of the European Public Prosecutor’s Office to cross-border terrorist crimes,” according to the latest draft of the conclusions.

Google’s Challenge | Google said late yesterday that it filed a legal challenge to a global record antitrust fine over the way it distributes its mobile phone operating system, Android. The company hasn’t asked for interim measures that would seek to halt an antitrust order for Google to change its contracts with phone manufacturers, a spokesman said. Google, which argues that the EU decision may damage its business model, must comply with the order by a Oct. 28 deadline or face daily fines.

Soap Opera | Chief EU Brexit negotiator Michel Barnier will today brief European commissioners on the state of play in the talks. But don’t expect big news. The two sides are locked in discussions and there might not be any white smoke until Monday.  EU-27 envoys may discuss the two long-awaited documents — on the Irish border and the future U.K.-EU relationship — when they meet in Luxembourg on Friday afternoon as talks on keeping the U.K. close to the EU’s customs regime intensify.

Digital Tax | We’re told the Austrian Presidency of the EU is working on a compromise proposal regarding the controversial planned levy on revenue that large tech companies like Google and Amazon make in the bloc. The aim is to discuss it at expert level on Oct. 10 and Oct. 25 before putting it on the agenda of the next meeting of EU finance ministers in November. The Financial Times cited a confidential legal opinion of the EU Council yesterday disputing the legality of the tax. “We’ll change the legal basis, it’s not the first time,” an EU government official told us.

In Case You Missed It

Calm, Please | Italian Finance Minister Giovanni Tria appealed for calm amid a war of words between the government and Brussels over Italy’s big-spending program for the coming year. Addressing lawmakers in Rome, Tria said the tone needs to come down a notch as the government prepares to present its draft budget by Oct. 15. He repeated the targets that have already led to a selloff in Italian assets, but did call the current bond yield spread “unacceptable.”

Poor Preparations | The EU has made “limited progress” in addressing the threat that a no-deal Brexit would pose to financial services and urgent action is needed, the Bank of England says. This isn't the first time the central bank has warned that a disorderly Brexit would endanger trillions of pounds of derivative contracts and millions of insurance policies.

Cleaner Cars | EU governments toughened a proposed cap on carbon dioxide from cars in 2030 after overcoming resistance by Germany and eastern nations. Following 13 hours of deliberations in Luxembourg on a draft law meant to spur the development of electric vehicles, EU environment ministers set a CO2-reduction target of 35 percent compared with 2021 — deeper than a 30 percent cut recommended by the bloc’s regulators. The rush for a final legislative deal will start later today when EU governments hold their first round of negotiations with the European Parliament, which is urging a 40 percent CO2 reduction.

WTO Rebuke | More than a dozen countries said they opposed the EU’s proposal to modify its WTO commitments to account for Britain’s forthcoming departure from the bloc. The U.S., China, Japan, Canada, Brazil and others said Tuesday that the EU’s plan is unacceptable because it includes inaccurate and incomplete trade data that may unfairly impact the region’s current WTO trade terms.

Chart of the Day

The euro area will expand by 2 percent this year, the International Monetary Fund said in its latest projection, revising down by 0.2 percentage points its previous forecast from July. The IMF said growth is plateauing amid escalating trade tensions and stresses in emerging markets. The Fund holds its semi-annual meeting this week in Bali, Indonesia.

Today’s Agenda

All times CET.

• 4 p.m. EU Council President Donald Tusk meets Bono, the U2 singer and co-founder of ONE International
• New rules to reduce marine litter will be voted on by the European Parliament's Environment and Public Health Committee
• LIBE Committee in the European Parliament votes on resolution for follow-up action on Facebook/Cambridge Analytica scandal
• EU27 envoys in Brussels meet to discuss state of play in Brexit negotiations
• Meeting of the College of EU Commissioners; EU chief Brexit negotiator Barnier participates
• Barnier gives a speech at the European Parliament of Enterprises 2018 event, organised by Eurochambres

--With assistance from Ian Wishart, Aoife White and Jonathan Stearns.

To contact the editor responsible for this story: Anne Swardson at aswardson@bloomberg.net, Iain Rogers

©2018 Bloomberg L.P.