Brussels Edition: Engine Damage, NATO Strain, German Unity

Viktoria Dendrinou

(Bloomberg) -- Welcome to the Brussels Edition, Bloomberg’s daily briefing on what matters most in the heart of the European Union. Sign up here to get it in your inbox every weekday morning.

With euro-area economic growth likely to stay muted for the next couple of years, it remains to be seen how badly the engine is damaged and what it will cost to repair. Data later this week are likely to show Germany either in a recession or just skirting one. Investor sentiment indicators due out today will give a taste of what comes next. German businesses are already turning more pessimistic on China, one of their biggest markets. And with monetary policy maxed out, any further evidence of a downturn will amplify calls for Angela Merkel’s government to provide bold economic stimulus — something it has so far vehemently resisted.

What’s Happening

Carbon Clash | Germany’s competitive challenges were laid bare in a forgotten frenzy over carbon fiber, which BMW and its peers bet would be the core of future automobiles. But the push, which came as Tesla was inventing the iPhone on wheels, proved to be more of an engineering vanity project and highlights the shortcomings of a corporate culture with a bias for stability. Here's more.

NATO Strains | NATO Secretary General Jens Stoltenberg  heads to Washington, where he’ll hold a series of meetings, including with Donald Trump. His trip comes days after Emmanuel Macron said Trump’s unilateral withdrawal of U.S. forces from Syria marked the “brain death” of the trans-Atlantic alliance. Meanwhile in Brussels, EU defense ministers will talk about EU-NATO cooperation, a discussion that Macron’s comments made a lot more interesting.

Farage’s Gift | While a group of EU lawmakers debate the latest on Brexit in Brussels today, Boris Johnson’s chances of winning the U.K. general election got another boost after Nigel Farage said his party wouldn’t contest Tory seats. The move should help Johnson’s efforts to secure a majority for a Brexit deal, but Farage’s party continues to pose a threat in other key regions.

Cambodia Action | The EU may move a step closer today to imposing trade sanctions against Cambodia over alleged humans-rights violations, just days after it sent troops to its border and called on neighbors to arrest exiled dissidents, accusing them of plotting a coup. The Commission is due to send a monitoring report to the Cambodian government as part of a threat to suspend a policy that lets it export all goods except weapons duty-free and quota-free to the EU.

In Case You Missed It

German Unity | Merkel signaled support for her deputy’s push to break a years-long impasse over Europe’s banking integration, saying Monday evening in Rome that the proposals from Finance Minister Olaf Scholz go in “the direction that we need.” While not officially endorsed by the government, Merkel’s comments reflect a willingness to negotiate on establishing EU-wide bank deposit insurance.

In the Air | EU regulators stopped the clock on their antitrust probe into Boeing’s plan to invest in Embraer, saying they hadn’t received sufficient information. The heightened scrutiny puts new pressure on Boeing’s plan to take an 80% stake in a venture controlling Embraer’s commercial airplane and services businesses, a move that would broaden its reach into the regional-jet market and position the two companies to better compete with Airbus. A review can only be restarted once the Commission gets the answers it needs.

Slovak Split | Slovakia’s former authoritarian premier, Vladimir Meciar, announced he will lead a new party into general elections, adding to the number of groups seeking to derail the country’s pro-western orientation. The vote comes amid rising frustration over corruption, which has boosted liberal and center-right parties but also fueled support for nationalist anti-establishment groups.

Warsaw vs Netflix | Poland’s prime minister wrote an official letter to Netflix requesting that the company correct facts about the Holocaust in a documentary series. His move follows last year’s decision by the nationalist ruling Law & Justice party to outlaw the phrase “Polish death camps” and make it a criminal offense to suggest that Poland was complicit in the mass murder of Jews during World War II.

Chart of the Day

Britain dodged a recession ahead of the now-postponed Brexit deadline, but the figures underscored the economic challenge facing whoever wins next month’s election. The latest numbers give parties across the political spectrum something to latch on to as they campaign, with both Boris Johnson and Jeremy Corbyn unveiling massive spending plans in a bid to woo voters.

Today’s Agenda

All times CET.

8:30 a.m. EU defense ministers meet in Brussels, to discuss EU-NATO cooperation, third-country participation in joint military projects 3 p.m. The European Parliament’s Constitutional Affairs Committee debates Brexit state of play ECB Supervisory Board Chair Enria, EBA Chair Campa, EU Commission Vice President Dombrovskis speak at an event on Basel III in Brussels NATO Secretary General Stoltenberg travels to Washington D.C. for four-day trip EU trade chief Malmström in Gothenburg, Sweden, participates in panel discussion on the Global Economy EU antitrust chief Vestager receives the Harvard Club Leadership Prize in Brussels ECB Executive Board member Coeure speaks at money markets event in Frankfurt First parliamentary sitting since Polish election, with Morawiecki to form new government as the ruling party battles for control of the upper house

Like the Brussels Edition?

Don’t keep it to yourself. Colleagues and friends can sign up here. We also publish the Brexit Bulletin, a daily briefing on the latest on the U.K.’s departure from the EU. 

For even more: Subscribe to Bloomberg All Access for full global news coverage and two in-depth daily newsletters, The Bloomberg Open and The Bloomberg Close.

How are we doing? We want to hear what you think about this newsletter. Let our Brussels bureau chief know.

--With assistance from Jonathan Stearns and Zoe Schneeweiss.

To contact the author of this story: Viktoria Dendrinou in Brussels at vdendrinou@bloomberg.net

To contact the editor responsible for this story: Heather Harris at hharris5@bloomberg.net, Iain Rogers

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.