Brussels Edition:  Face-Off in Munich

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

The Americans and the Chinese are coming well prepared for a confrontation as global officials descend on an annual defense forum in Munich. China is sending one of its top diplomats, Yang Jiechi, to the Munich Security Conference, while Vice President Mike Pence heads the U.S. delegation. Both sides are vying for influence and technological dominance in Europe. The Chinese, in particular, will be keen to push back against U.S. efforts to exclude their companies, especially Huawei, from building Europe’s 5G mobile networks.

What’s Happening

Another Setback | The U.K. won’t seek to reopen the divorce deal it negotiated with the EU, according to a person familiar with a meeting this week between Britain’s Brexit Secretary Steve Barclay and EU chief negotiator Michel Barnier. It’s unclear how, or even if, the U.K. can leave the bloc as scheduled in six weeks, especially after Theresa May suffered another embarrassing parliamentary defeat yesterday.

Penalizing Putin | Consensus is emerging in the EU on how to penalize Russia over its harassment of Ukraine in the Sea of Azov. As officials in Brussels resume talks this morning, we’re told the focus has been narrowed to potentially imposing sanctions on about six to seven mid-ranking individuals, although no companies will be targeted. EU foreign ministers will discuss the situation in Ukraine Monday.

Spanish Steps | Spain is on tenterhooks as Prime Minister Pedro Sanchez briefs ministers on his next steps after parliament blocked his budget on Wednesday. The expectation is that he will call an election, Spain’s third in four years. Here’s what you need to know about the Socialist leader’s predicament and what’s coming next.

Corruption Cuts? | Romania’s budget wouldn’t normally raise eyebrows, but the one due for approval today includes funding cuts of up to 15 percent to allocations that pay for prosecutors to tackle corruption and organized crime, as well as intelligence services. Here’s why critics worry this amounts to a crackdown against the very institutions that helped send waves of corrupt politicians to prison.

In Case You Missed It

Estonia’s Online Militia | In an age of hybrid warfare, what can other countries learn from Russia’s most digitized neighbor? Estonia’s cyber volunteers use creative tactics as they train to defend the country’s online banking, voting, infrastructure and other systems from possible digital attack.

Peak Populism | Think populists parties will make historic gains at this May’s European parliamentary elections and gain influence over policy making? You may think again after reading this Bloomberg analysis.

Restoring Faith | Talking of populism, IMF Managing Director Christine Lagarde told EU leaders yesterday that they need to redouble efforts to lift living standards to “help restore faith in the European project.”

Superjumbo Scrapped | It’s the end of the line for another icon of European manufacturing prowess, as Airbus said it will stop making the A380 double-decker jumbo as of 2021. Much like the Concorde — crown jewel of the continent’s industrial craftsmanship — the A380 won the hearts of passengers and politicians, but never the broad support of airlines.

Screening Investors | The EU approved rules to prevent foreign investments from threatening national security in a sign of growing political unease over Chinese acquisitions. The goal of the new legislation is to limit foreign threats to certain critical infrastructure.

Chart of the Day

Brussels Edition:  Face-Off in Munich

Germany’s economy stagnated at the end of 2018, trailing most euro-area peers, and continued trade tensions mean any pickup in Europe’s powerhouse economy could be muted. While the country narrowly avoided a recession, it fell to others to drive euro-area growth. Economic signals at the start of 2019 haven’t been encouraging either, and a slew of institutions have downgraded their outlooks.

Today’s Agenda

All times CET.

  • EU foreign policy chief Federica Mogherini, Commissioners Julian King, Johannes Hahn, Christos Stylianides attend Munich Security Conference
  • Weekly Belgian government cabinet meeting. Belgian officials also meet with EU Commission’s Brexit “Preparedness” task force

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