Brussels Edition: Scrambling for an Iran Response

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

Ursula von der Leyen promised a “geopolitical” European Commission. Her pledge will be put to the test sooner than she may have bargained for, as a proxy war rages in Libya, tensions rise in the Mediterranean and the Middle East is on the brink of combustion. Blindsided by events in its own backyard, the EU has stuck to its usual lines of expressing “strong concern” and urging “maximum restraint,” while last night saw the collapse of the nuclear accord with Iran it had been fighting to rescue. The bloc’s foreign policy weakness is rooted in the very real differences between member states on how they see the world — especially relations with the U.S., China and Russia. We’ll know soon enough if the collective vow to boost the EU’s global standing is anything more than empty words and wishful thinking.

What’s Happening

Spanish Breakthrough | Spain’s acting Prime Minister Pedro Sanchez is on course to win a tight confidence vote for his government in Parliament tomorrow, paving the way for an end to the stalemate which has roiled the country since 2017. Now comes the hard part — ruling a divided country with a minority government backed by the far left and Catalan separatists.

Austrian Model | Speaking of new governments, Sebastian Kurz will be sworn in tomorrow for a second term as chancellor of Austria, after clinching an historic alliance with the Greens. The deal — which could serve as a model for other center-right leaders in Europe — will push the boundaries of conventional economic, energy and tax policies in a bid to eliminate Austria’s net carbon emissions by 2040.

Friend in Zagreb | Croatian voters rejected President Kolinda Grabar Kitarovic’s bid for a second term, electing former premier and pro-European Zoran Milanovic to replace her in a runoff ballot. Milanovic, who led the nation into the EU in 2013, prevailed over a nationalist campaign from Kitarovic, whose popularity fell due to her links to the scandal-plagued mayor of Zagreb.

Labour Leadership | As the U.K. Parliament prepares to ratify the Brexit agreement, the Labour Party’s  Executive Committee is due to outline a timetable for the leadership election this week, following a catastrophic election result. Keir Starmer, who’s the early front-runner in the contest according to a YouGov poll of Labour party members, is a vocal Remainer — though it may be too late for that.

In Case You Missed It

Italian Instability | Italian Prime Minister Giuseppe Conte already exceeded the expectations of most of his political opponents by surviving the collapse of his first government last summer. But his second coalition is so fragile that a host of issues could trip him up as early as this month. Here’s six ways the Italian government could collapse.

No Zombies | There’s no end of theories on all the ways in which negative interest rates are hurting economies. But in Denmark, where the policy has existed longer than anywhere else, the fear that unnaturally low borrowing costs prop up zombie companies that would collapse in more normal times has been finally put to rest, Frances Schwartzkopff reports.

French Outlook | The French economy will grow 1.3% this year, the same pace as 2019, as long as a compromise is reached quickly with labor unions that are on strike over pension reform, Finance Minister Bruno Le Maire said. That’s a big if

Travel Destinations | Back from your holiday and already craving for your next one? You are not alone. We have a new year’s present for you — a comprehensive guide to the 24 best travel destinations for this year and the data you need to plan your trip.

Chart of the Day

Brussels Edition: Scrambling for an Iran Response

Germany faced  higher prices and job losses at the end of 2019, a year marked by a manufacturing slump that threatens to undermine the relatively strong consumer sector. Europe’s largest economy is at a critical point, with government and household spending barely offsetting the worst manufacturing malaise in a decade.

Today’s Agenda

All times CET.

  • EU diplomats meet in Brussels to discuss situation in the Gulf
  • 11 a.m. Eurostat to publish industrial producer prices for November
  • U.K. Labour party’s executive committee meets to agree timeline for leadership contest
  • The CSU, Angela Merkel’s Bavarian sister party, begins a meeting to discuss strategy as tensions mount between Germany’s coalition partners; Commission President von der Leyen attends

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