Brussels Edition: With strings attached

Brussels Edition
Bloomberg

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

The 1.8 trillion-euro deal struck between EU leaders last summer isn't really a done deal — as we warned you. Diplomats begin talks today on a proposal linking disbursements from the bloc's budget and jointly-financed recovery fund to rule-of-law standards. While leaders had agreed in principle that such a mechanism would be created, Germany had the unenviable task of coming up with how it would work. Make it too strict and illiberal governments in the East, where the independence of institutions has been eroded, will block it. Make it too lenient and richer nations won't agree to bankroll a joint pot for fear funds will be misappropriated. In the end, Germany's proposal is a relatively tolerant one. Berlin's priority is to channel much-needed cash to the countries that need it as soon as possible. It's unclear though whether everyone shares the same sense of urgency.

Nikos Chrysoloras and Viktoria Dendrinou

What's Happening

Delicate Talks | Crunch Brexit negotiations continue in Brussels today after the EU said it won't abandon trade talks with the U.K. even if Boris Johnson's government doesn't withdraw its plan to break international law. Still, the bloc renewed its threat to take legal action in a sign of just how delicate things are as the clock ticks on a compromise.

Virus Update | With global Covid-19 cases topping 33 million, the G-20 Leaders' Summit, which had been planned for Riyadh, Saudi Arabia, will now be held virtually. Meanwhile, a U.K. minister refused to rule out more restrictions, even as lawmakers pushed back against government power, and 12 crew members on a cruise ship in Greece tested positive.

No Cash | The EU's top court will today weigh in on the bloc's rules on nations limiting the use of cash payments. The non-binding opinion comes as a reduced dependence on cash is seen as a way to clamp down on tax evasion, even as critics point to the risk of the disappearance of physical currency.

Pressuring Russia | Russian markets are once again being plagued by multiple sanctions threats that could materialize before the end of the year. Some of the measures could come from the EU. Here's a rundown on how the West can punish Russia's economy again.

Belarus Meeting | Emmanuel Macron agreed to meet the leader of the Belarusian opposition. Speaking at a press conference in Vilnius, Lithuania, the French president said he would support sanctions against the regime in Belarus amid increasing tensions between the EU and Moscow, which is helping President Alexander Lukashenko retain power.

In Case You Missed It

ECB Support | The ECB is ready to deploy more monetary stimulus if needed as the pandemic damps prospects for the economy, Christine Lagarde told EU lawmakers. Policy makers are staking out their positions on whether the central bank should add support, with most economists predicting the emergency bond-buying program will be expanded this year.

All Clear | London's major clearinghouses will be able to do business with banks in the EU next year, averting Brexit market disruption. The decision by the bloc's markets regulator came after the Commission deemed U.K. clearing regulations equivalent to its own for the18 months after the transition period ends — a rare sign of agreement between the two sides.

EU's Power | In his latest speech on the EU's "strategic autonomy" push, Council President Charles Michel attributed China's surprise commitment to climate neutrality to pressure from Brussels. This is how China's ambitious commitment, which had indeed been a persistent EU demand, could change the future of our planet's climate.

Spanish Woes | Spain's Supreme Court barred Catalonia's regional president from office for 18 months, adding more instability to a country immersed in its worst economic crisis in living memory. The decision has deep ramifications since Prime Minister Pedro Sanchez is seeking support from separatists to pass a budget he needs to rebuild the economy.

German Fauci | Germany's star virologist Christian Drosten helped spare his country from the worst of Covid-19. Now he's worried about the second wave. He has the ear of Chancellor Angela Merkel, who seems to share his fears.

Chart of the Day

While other economies have shut down and then reopened, Sweden has kept its restrictions largely intact since mid-March, offering a glimpse of what that might look like for other economies who are battling new outbreaks of the coronavirus. In this regime, production remains well below its pre-pandemic level for most of the services sector and for Sweden as a whole, with services output as well as total GDP about 5% lower in July.

Today's Agenda

All times CET.

  • 9:30 a.m. EU top court gives a non-binding opinion in potentially precedent-setting case on EU nations restricting the use of cash
  • 10 a.m. EU ministers responsible for research and innovation meet
  • 11:05 a.m. Commission President Ursula von der Leyen visits Portugal and delivers a speech on the Recovery Plan and Resilience at the Fundação Champalimaud
  • 2 p.m. EU industry chief Thierry Breton participates in the launch event for the Raw Materials Alliance
  • 3 p.m. Council President Charles Michel receives the Georgia's Prime Minister Georgi Gakharia 
  • Informal meeting of EU development ministers to discuss the bloc's relations with Africa
  • EU climate chief Frans Timmermans delivers a keynote speech via videoconference at the World Circular Economy Forum in Toronto
  • EU foreign policy chief Josep Borrell chairs the EU "facilitated dialogue" for normalization of relations between Serbia and Kosovo

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