Brussels Edition: Yet Another Wrinkle

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

The EU is still trying to work out the impact of the announcement yesterday by U.K. House of Commons Speaker John Bercow that effectively bans Theresa May from bringing her Brexit deal back to Parliament for a third time unless it changes significantly. Some EU diplomats say it’s dealt a major blow to hopes of wrapping the process up soon. Others had already resigned themselves to the agreement not passing anyway. It heightens tensions further ahead of Thursday’s European Council as the 27 remaining governments try to arrive at a common position on extending Article 50. Some of their thinking will be revealed today when the EU’s European Affairs ministers meet to discuss Brexit.

What’s Happening

Trump Trade | You’d be forgiven for thinking that Thursday’s EU Summit is all about Brexit, but it’s not. In what’s sure to annoy Donald Trump, the latest draft of the meeting’s communique doesn’t explicitly call for the adoption of negotiation mandates for an agreement with the U.S. on the elimination of tariffs for industrial goods, as France kicks the can down the road. The U.S. has already warned that its patience is wearing thin.

Merger Rules | The communique also tones down a push by France and Germany on the need to overhaul competition rules to allow European companies to acquire scale and compete better. Still, leaders will ask the EU Commission to identify ways to “fill the existing gaps in EU law” to address the distorting effects of foreign state ownership and state aid, with an eye — no doubt — on China.

Rigging Challenge | HSBC will get a chance to argue in the EU’s second-highest court today against a European Commission decision to fine it, together with JPMorgan and Credit Agricole, a total of 485.5 million euros for rigging the Euribor benchmark. It’s the first hearing after the lenders refused to join a multi-bank settlement and challenged the regulator for its handling of the probes.

Multilateralist Merkel | Angela Merkel will discuss multilateralism in a speech at the Global Solutions Summit in Berlin today, followed by a panel discussion moderated by Bloomberg Editor-in-Chief John Micklethwait. As the global order unravels, the German chancellor is stuck between a rock and hard place: Trump’s America First policy is forcing her to make an impossible choice between the U.S. — the force behind the country’s modern economic success — and China, the key to its future growth.

In Case You Missed It

Jobs First | Merkel’s chief of staff said preserving jobs will be the government’s priority when it comes to a potential merger between Deutsche Bank and Commerzbank. The comments by Helge Braun came as the two lenders got the green light to proceed with negotiations on a tie-up after Finance Minister Olaf Scholz agreed not to oppose the tens of thousands of job cuts needed to make a deal work, according to people familiar with the matter.

Chinese Warnings | At a meeting with his EU counterparts in Brussels yesterday, China’s Foreign Minister Wang Yi said his government is seeking fair competition and warned against targeting Chinese companies when developing next generation wireless telecommunication networks, known as 5G. On Thursday, EU leaders will mandate the Commission to recommend a “concerted approach to the security of 5G networks” against the backdrop of U.S. calls to ban the use of Chinese equipment for security reasons. 

Carbon Fallout | Britain’s maneuvering on how to leave the EU is starting to unsettle the region’s carbon market. The Commission yesterday vowed to “do its utmost” to protect the integrity of the emissions trading system, which could be flooded with unneeded permits if the U.K. crashed out of the EU without a deal, leaving companies there holding carbon credits they no longer need.

Yellow Vests | France will strengthen its security rules and potentially ban rallies in some areas of Paris as it seeks to end violence linked to the Yellow Vest movement. President Emmanuel Macron and his government are scrambling to pull together a response after images of the battered Champs Elysees were beamed around the world on Saturday.

Chart of the Day

The European Central Bank is approaching the point where it needs to decide whether negative interest rates are more of a problem than a solution. Once officials pushed back plans to tighten policy, warnings have increased that the potency of a key instrument used to rekindle growth in the 19-nation bloc is diminishing the longer it remains in place. 

Today’s Agenda

All times CET.

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