Crypto News: Brussels Edition: Tackling the energy shock

Welcome to the Brussels Edition. I'm Suzanne Lynch, Bloomberg's Brussels bureau chief, bringing you the latest from the EU each weekday. Make sure you're signed up.

The fall in oil prices today has given some reprieve to markets following US President Donald Trump's suggestion that he's keen to withdraw from the war in Iran sooner rather than later.

In Europe, however, rising energy costs, captured in a slew of inflation data this week, are causing alarm. The conflict in the Middle East has added €14 billion ($16.2 billion) to the cost of the European Union's fossil fuel imports, the bloc's energy commissioner, Dan Jorgensen, said following yesterday's meeting of EU energy ministers.

Today, the European Commission unveiled a limited tweak to its Emissions Trading System, ahead of a broader revision in July.

The ETS has been the cornerstone of the EU's climate policy since it was launched in 2005. But the cap and trade system has come in for criticism from energy-intensive companies covered by the scheme and some governments of late.

The commission, the EU's executive arm, proposed today adjusting the ETS in a bid to limit volatility. While stopping short of immediately releasing additional volumes into the market, it proposed scrapping the invalidation of certain permits in its Market Stability Reserve – a mechanism that controls supply in the carbon market.

The measure effectively means the EU aims to limit carbon price volatility by boosting the number of permits it can keep in reserve for potential future releases in case of any price swings. That is a less aggressive move than some traders had priced in.

As affected industries assess the impact of the new proposal, Brussels has been urging EU countries to take steps at national level to save energy, particularly in the transport sector.

Securing agreement between the EU's 27 members on energy policy will be a challenge, however. As we report today, yesterday's meeting of energy ministers laid bare divisions between member states.

Countries including Germany, the Netherlands and the Nordics warned against the EU intervening in the market. Others, including France, called for redistribution of windfall profits and subsidies for the power sector, according to a person familiar with the matter.

The Latest

Greece's stocks were upgraded to developed-market status by MSCI Inc., marking a milestone in the country's recovery from a debt crisis that at the time was a key threat to the euro-area economy.
The defense ministers of France and Japan pledged to work together on security in the Pacific as the conflict in the Middle East draws away American military supplies and troops from the region.
KNDS, the maker of Germany's Leopard 2 tanks, is gauging investor interest for an IPO that may raise as much as €5 billion, we have been told.
Deutsche Lufthansa is readying plans to ground planes in case demand drops because of the war in the Middle East, CEO Carsten Spohr told employees yesterday.
Serbian police clashed with hundreds of anti-government protesters outside of university headquarters where the authorities were investigating a fatal fall of a student.

Seen and Heard on Bloomberg

Ousted Banca Monte dei Paschi di Siena boss Luigi Lovaglio said he expects to win a new term at the helm of the Italian lender despite efforts by the board of directors to replace him. "I strongly believe that continuity, execution is crucial at this stage for unlocking the second stage of value creation for our shareholders," he told Bloomberg TV in an interview today. "My commitment will be recognized by the market," he said, adding he's "comfortable" running against the board's wishes.

Chart of the Day

Shares in LVMH have had their worst start to a year on record, as the impact of war in the Middle East clouds the global economic outlook and intensifies demand headwinds for luxury goods. The war has compounded a difficult period for the group, with its downbeat outlook in January poorly received by investors. LVMH in particular tends to be more exposed to so-called aspirational customers who spend less in uncertain times compared to some of its more exclusive competitors.

Coming up

EU Parliament delegation visits China today and tomorrow
EU Commissioner Hadja Lahbib in Japan today and tomorrow
US President Donald Trump delivers address to the nation tonight

Final Thought

Malta has had great success in attracting prominent crypto firms. Photographer: NurPhoto/NurPhoto — Malta has had great success in attracting prominent crypto firms.

The EU plans to centralize crypto supervision under the European Securities and Markets Authority, or ESMA, which Malta opposes, seeing it as a politically motivated assault on its success in attracting crypto firms. For months now, the the bloc's smallest country has been openly railing against such plans. Should Europe's council of leaders and parliament back the proposal, a process supporters are hoping to advance this summer, Malta would have to cede direct oversight of big industry names like Crypto.com, Gemini and Bitpanda, Laura Noonan reports.

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