Brussels Edition: The Longest Days

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

After (we think) a Brussels summit record-setter of almost 20 hours of talks, European Union leaders failed once again to agree on who should get the bloc's top jobs. Today they'll take another crack at it, with the hope that they can overcome their differences and finally wrap up the strenuous and often chaotic negotiations that have made the EU appear paralyzed by competing national and party interests. But with a number of countries and EU lawmakers still opposing the vast majority of permutations put on the table so far, it remains unclear how the impasse can be broken.

What's Happening

Italian Maneuver | Italy has made its move to avoid being disciplined for excessive debt. The populist government said that almost 8 billion euros in lower spending and higher revenues should bring the country's deficit into line with EU requirements, at least for this year. But 2020 remains an open issue, with deputy premier Matteo Salvini vowing to bring home the spending cuts he has promised. The Commission will decide only after the top jobs puzzle has been solved, but the mood seems to be turning toward leniency.

Madame President | The package deal negotiated by EU leaders could mean one of the bloc's most important institutions, the ECB, may soon be headed by its first ever female president. As part of the grand compromise being cooked up, Mario Draghi's replacement may well be a woman — and more specifically a Frenchwoman. Chief among the likely contenders: Christine Lagarde. 

Parliamentary Candidates | As leaders seek to hammer out a compromise on who to appoint where, it's business as usual for the European Parliament, which plans to elect its next president tomorrow in Strasbourg. Candidates are due to declare themselves by this evening. If Frans Timmermans becomes the next commission chief, the political bargain would be to install German Christian Democrat Manfred Weber atop the 28-nation Parliament.

More Tariffs | The U.S. published a list of $4 billion worth of EU goods the U.S. could hit with duties as retaliation for European aircraft subsides. The imposition of the proposed tariffs would threaten to further strain ties as the U.S. and EU try to sit down to negotiate a trade deal.

In Case You Missed It

Downbeat Data | Manufacturers in the euro area remained stuck in a slump last month as new orders slid and business confidence remained subdued. The downbeat data is worrying as it signals no imminent end to the region's economic slowdown, which began more than a year ago and could clear the way for ECB policy makers to go ahead with more stimulus if the situation doesn't improve.

Brexit Contenders | Jeremy Hunt said he would "100% not" suspend Parliament to force through a no-deal Brexit, drawing a dividing line with Boris Johnson as the two men entered the last days of campaigning before Tory activists start voting for the U.K.'s next prime minister. Hunt also said that even in the event of a no-deal exit, Britain must pay the divorce bill to the EU, which covers agreed obligations to the EU budget.

Iran Breach | Iran said it had exceeded the cap on its stockpile of enriched uranium set under the 2015 nuclear deal, risking a confrontation with European nations that had urged it to stick to the accord. The step further heightens tensions in the Persian Gulf that have spiked since the Trump administration exited the nuclear accord a year ago and reimposed crippling sanctions on Tehran.

Stimulus Signs | ECB policy makers gave added impetus to expectations that more monetary stimulus is on the way, expressing concerns about the euro zone's feeble inflation outlook. In remarks at a conference in Helsinki, central bankers echoed Mario Draghi's promise that there's room to cut interest rates or resume bond purchases to boost inflation amid the current slowdown. 

Chart of the Day

Some of Europe's biggest stocks are caught in the midst of Switzerland's standoff with the EU over recognition for its equity market. The country ranks third by member weighting on the benchmark Stoxx Europe 600 Index, with Nestle and drugmakers Novartis and Roche Holding as the gauge's biggest members. Following an unprecedented Swiss measure to block trading of the country's shares in the EU starting July 1, European equity desks are getting ready to redirect trades in most of the stocks via Zurich, while some disruption and price swings are expected.

Today's Agenda

All times CET.

• New EU Parliament starts first plenary, due to elect new president
• ECB Governing Council members Knot and Vasiliauskas speak at a real estate conference in Vilnius

--With assistance from Nikos Chrysoloras, Alessandro Speciale and Jonathan Stearns.

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

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