Spain's Political Engine Spluttered to Life: Brussels Edition

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The broken-down engine that is Spanish politics has spluttered into life with the agreement by leftist parties to try to form a new government. The pact between acting Socialist Prime Minister Pedro Sanchez and Podemos leader Pablo Iglesias looks tricky but not impossible: The duo will have to bolt on alliances with other groups and will need the help of Catalan separatists to secure a majority. They have pledged to increase pensions in line with living costs, prompting concerns about the system’s sustainability. Bank stocks fell as investors sensed a less favorable environment.

What’s Happening

Tariff Reprieve | The EU expects to dodge punitive tariffs on its automobile exports to the U.S. today, after an intense lobbying campaign by German carmakers. But a sword of Damocles will remain over the continent’s economy, as Donald Trump is only expected to delay the decision, rather than shelve the plans entirely. 

Eastern Troubles | Eastern Europe may become a casualty of Germany’s economic malaise. The region has held up well until now, but data to be released on Thursday is expected to reveal the weakness is spreading.

Unwelcome Member | After sending Boris Johnson two unanswered letters, incoming Commission chief Ursula von der Leyen expects the British government to nominate a representative for the bloc’s executive by the end of this week. As incongruous as that may sound, the latest Brexit extension means the new Commission can’t be confirmed and sworn in unless a Brit joins its ranks — even if only for a few weeks.

Macron Braces | Emmanuel Macron and his team are digging in for a winter of strikes, and the government says it won’t back down. “Every time we touch the pension system, there are strikes,” Prime Minister Edouard Philippe said in an interview. “My aim is to show the French people that the future system is more advantageous, fairer, and more solid for them.”

In Case You Missed It

European Defense | EU governments approved a new set of defense-cooperation projects to bolster Europe’s military clout after French President Macron warned that global institutions need an urgent overhaul. Along with a planned 13 billion-euro European Defense Fund, the moves are the cornerstones of efforts to reduce the bloc’s reliance on U.S.-dominated NATO. 

Trump Threat | The Trump administration ratcheted up pressure on the World Trade Organization by threatening to block its budget and effectively halt its work from next year. It could force countries to fundamentally rethink their reliance on the WTO to negotiate trade deals and settle a growing number of disputes.

Confidence Boost | German investor confidence rose to the highest level in six months, raising hopes that the worst of the economic downturn may be over. But Europe’s largest economy isn’t out of the woods yet: while trade tensions are showing signs of easing, the outlook is still murky.

Capital Workaround | European banks have found a silver lining to their recent troubles: They can make a case that they’re too weak to abide by new regulations being set by Brussels. After years fighting a rearguard battle against tighter requirements, some bankers in Europe now say they sense an opportunity to persuade policy makers to go easier. 

Chart of the Day

People living in Finland are the most content, while those from Bulgaria trailed in the satisfaction ranking of European countries, according to Eurostat data. Inhabitants of Austria, as well as non-EU members Switzerland and Norway, also indicated a high degree of happiness.

Today’s Agenda

All times CET.

9:15 a.m. CEPS event on IMF’s toolkit for climate mitigation policies 11 a.m. Eurostat to release industrial production reading for September 4 p.m. MEPs will discuss the latest developments and rising tensions among Eastern Mediterranean countries following Turkey’s offshore drilling activities 6 p.m. ESM Managing Director Klaus Regling speaks at annual meeting of the Association of Banks in East Germany  7:30 p.m. Council President Donald Tusk speaks at a ceremony at the College of Europe  NATO-Industry Forum held in Washington D.C. EU foreign policy chief Federica Mogherini receives Somalia’s Prime Minister Hassan Ali Khayre Commission Vice President Valdis Dombrovskis speaks at the launch event of the Long Term and Sustainable Investment Intergroup in Strasbourg

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–With assistance from Nikos Chrysoloras.

To contact the authors of this story: Viktoria Dendrinou in Brussels at [email protected] Penty in Madrid at [email protected]

To contact the editor responsible for this story: Emma Ross-Thomas at [email protected], Chris Reiter

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