Brussels Edition: Let the Horse-Trading Begin

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

It’s finally time for the jostling everyone has been waiting for. The horse-trading over appointments at the top of the European Union will kick off as leaders meet today in Brussels for a special summit. Bruised or bolstered by the weekend election results, the bloc’s top politicians will come ready to strike deals and secure the best possible gigs for their compatriots and allies. A lot is at stake. The people at the helm will have to deal with a barrage of challenges ranging from Donald Trump’s trade salvos, sluggish growth in the euro area and, of course, the likely fallout from Brexit — whenever, or if ever, that happens.

What’s Happening

May’s End | One leader may not care much about today’s summit: Theresa May. In what’s likely to be her final trip to the Belgian capital as British premier, May will meet her counterparts but is unlikely to have much to say on who will run the bloc. Back at home, a no-deal Brexit is looking more likely after the main political parties were hammered in the EU elections. Still, for his part, Labour Leader Jeremy Corbyn is promising that any Brexit deal will get a public vote.

Italian Aspirations | There’s one nation that’s unlikely to get a post as powerful as the one held currently by one of its countrymen. Italy will seek a seat on the European Central Bank’s Executive Board once Mario Draghi steps down this year, and use it to push the institution to buy bonds to fund infrastructure projects, according to a senior lawmaker in the coalition government.

Debt Penalty | But Italy may have bigger problems than securing a top EU job. The European Commission is mulling  proposing a disciplinary procedure against Rome as soon as next week for its failure to rein in debt, which could pave the way for a 3.5 billion-euro penalty. That would escalate Italy’s budget tussle with Brussels, which roiled markets in 2018.

Salvini Rules | Continuing the Italian theme, Matteo Salvini is wasting no time asserting his control over the populist government after Sunday’s European election triumph. Although party lieutenants have been pressing him to ditch his ally, the anti-establishment Five Star Movement, he pledged to forge on with the fractious coalition.

In Case You Missed It

Greek Boon | The mood is much more buoyant around the EU’s other problem child: yields on Greek 10-year bonds fell to the lowest level since Bloomberg began compiling data, while stocks rallied. The reason? A crushing defeat for Prime Minister Alexis Tsipras in the EU elections, which forced him to call a snap national vote that investors assume will be won by the pro-business opposition party.

Romanian Jail | Tsipras isn’t the unhappiest leftist leader on the continent. Romania’s most powerful man was sent to prison for corruption, shaking the government as it clashes with the EU over judicial independence. The guilty verdict against ruling-party boss Liviu Dragnea was the third blow to his Social Democrats in two days after an unexpected defeat in EU elections and a referendum that will block part of their efforts to overhaul the courts.

German Stability | In other socialist disasters, support for the junior partner in German Chancellor Angela Merkel’s government — the Social Democratic Party — collapsed in Sunday’s vote. While her coalition will probably survive, its fragility could undermine Germany’s ability to push its agenda, Patrick Donahue and Birgit Jennen report.

Kurz Ousted | Not that things look much better on the right. Austrian Chancellor Sebastian Kurz was ousted from office, as his erstwhile nationalist partners lined up behind a motion to dismiss him, meaning the country will likely be ruled by a caretaker government ahead of snap polls in September. It was a reversal of fortunes for Europe’s youngest leader, coming just hours after his conservative party surged to a decisive victory in the EU ballot.

Happy Poles | Poland’s ruling nationalists, meanwhile, won a landslide victory over a liberal coalition, as strong economic growth outweighed concerns over democratic standards. The ruling party has benefited from a splurge on welfare, while tight control over public television, which is run by a former Law & Justice lawmaker, has also helped limit the impact from scandals.

Chart of the Day

The European Union vowed to reject any U.S. push to curb imports of EU cars and auto parts, highlighting the danger of greater transatlantic trade tensions. EU trade chiefs yesterday dismissed an idea floated by President Donald Trump earlier this month of fixing quotas on tens of billions of European automotive exports to the U.S. Being played out in the shadow of a U.S.-China trade war that has unnerved investors worldwide, the transatlantic discord risks morphing into a new headwind for the global economy.

Today’s Agenda

• Informal Summit of EU leaders in Brussels to discuss results of European elections, begin negotiations on who gets the bloc’s top jobs
• EU Parliament leaders meet to discuss who to back for the presidency of the European Commission
• EU Commission VP Katainen addresses International Trade Union Confederation (ITUC) and European Trade Union Confederation (ETUC) General Meeting on Sustainable Development Goals in Brussels

To contact the editor responsible for this story: Vidya N Root at vroot@bloomberg.net, Iain Rogers

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