Presented by the European Commission.

By HANS VON DER BURCHARD

with ZOYA SHEFTALOVICH

PRESENTED BY

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GOOD MORNING AND HAPPY HALLOWEEN! This is Hans Von Der Burchard, POLITICO’s senior German politics reporter, bringing you today’s Playbook. You’ll usually find me whizzing between the chancellery, the Bundestag and the foreign ministry in Berlin, covering Olaf Scholz’s government and EU foreign policy while also keeping an eye on Latin America (more on that below). If you’re a keen Germany-watcher, subscribe to our weekly Berlin Bulletin newsletter. My colleague America Hernandez will be with you for Tuesday’s Playbook — send tips this way.

And don’t forget: Daylight savings ended overnight, with clocks going back an hour.

DRIVING THE DAY: LULA WINS IN BRAZIL        

BOLSONARO OUT: Anyone who followed Brazil’s presidential election runoff Sunday night experienced a true thriller, as early results suggested incumbent right-winger Jair Bolsonaro might be reelected, before the vote count slowly shifted the outcome in favor of his leftist opponent (and former president) Luiz Inácio Lula da Silva. In the end, Lula took it by a whisker, winning 50.9 percent of the vote to Bolsonaro’s 49.1 percent.

Relief in Europe: Lula’s victory, despite the narrow margin, comes with high hopes in the EU that the political veteran — who is set to take up his ground-breaking third presidential term in January — will enforce better protection of the Amazon rainforest, which suffered shocking levels of deforestation under Bolsonaro. “Brazil is ready to resume its protagonism in the fight against the climate crisis, protecting all our ecosystems, especially the Amazon rainforest,” Lula tweeted Sunday night, vowing to “fight for zero deforestation.”

That’s what Europe wants to hear … as it opens a path to unlocking the ratification of the EU-Mercosur trade Deal with Argentina, Brazil, Paraguay and Uruguay.

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FALLING INTO PLACE: Although the EU’s Mercosur deal was officially finalized in 2019, it has been in limbo ever since due to European (especially French) concerns over Amazon deforestation and Bolsonaro’s low credibility in addressing them. Both sides have been working on additional environmental safeguards that are meant to convince critics and make the deal acceptable for political approval. Now, after President Emmanuel Macron’s victory earlier this year in the French election and Lula’s win in Brazil, efforts to move forward with the Mercosur deal can step into high gear.

Timing is of essence: With the European Parliament heading for an election in 2024, the EU-Mercosur agreement needs to be approved next year to avoid even longer delays. Fortunately, two very trade-friendly countries — Sweden and Spain — will be taking over the rotating presidency of the Council of the EU during 2023, meaning there will be a strong political push to proceed with the ratification of the landmark trade agreement.

The Russia factor: Even though the Mercosur agreement has always faced strong opposition from environmental and agricultural associations in Europe — which Lula’s victory won’t just sweep aside — Russia’s aggressive war against Ukraine has added more layers to the arguments of those pushing the trade deal: that democracies across the world should stick together … the EU would to well to tap into a new export market in South America (also to reduce dependencies on China) … and that this might be a prime chance for Europe to reach out to the global south before China’s footprint there becomes even stronger.

Green dimension: Solid environmental commitments by Lula could especially help Green politicians around the bloc, who have traditionally opposed the deal, change their minds, given the current geopolitical situation.

Remaining hurdles: But despite Lula’s environmental pledges, ratification of the trade deal won’t be a walk in the park, as the newly elected president has vowed to renegotiate parts of the agreement he sees as too disadvantageous for Brazil’s industry. Moreover, it was not immediately clear overnight whether Bolsonaro would accept defeat — or question the legitimacy of the results, potentially throwing Brazil into a similar political crisis as the U.S. faced following the 2020 presidential election.

TRADE COUNCIL       

TRICK OR TRADE: As EU trade ministers meet in Prague today, the news from Brazil will certainly be welcomed — but they have a more immediate priority. The ministers will need to send a clear message to their special guest, U.S. Trade Representative Katherine Tai: Either treat European trade partners fairly and reverse course on the most controversial, market-distorting measures of the recently signed U.S. Inflation Reduction Act — such as encouraging consumers to “Buy American” electric vehicles — or the EU will have to play its own trick and retaliate.

Wide frustration: Emmanuel Macron and Olaf Scholz set the tone last week when they agreed over lunch in Paris that the EU might have to resort to more protectionist, subsidy-based support measures for its industries if the U.S. doesn’t backtrack. Other EU countries share concerns about the U.S. law: Sweden’s new trade minister, Johan Forssell, told my colleague Camille Gijs on Sunday in Prague that “there are some elements in the Inflation Reduction Act that are worrying and they are not in accordance with World Trade Organization rules.”

Fighting fire with fire? Whether the EU should retaliate by setting up its own “Buy European” subsidy scheme, as Macron suggested last week, is still up for debate: The European Commission’s executive vice president and trade chief Valdis Dombrovskis told Playbook that the focus should now be on “resolving this issue through dialogue,” instead of descending into a tit-for-tat trade dispute. “We now have established a joint task force in order to solve the problem of the Inflation Reduction Act,” Dombrovskis said Sunday evening, adding that he had started to discuss the issue with Tai during a bilateral meeting that same evening.

RUSSIA’S WAR       

MOSCOW’S GRAIN DEAL EXIT SPARKS FRICTION: The Kremlin’s announcement on Saturday that it was suspending its participation in the U.N.-brokered deal that unblocked Ukrainian grain exports triggered a strong backlash over the weekend, with U.S. Secretary of State Antony Blinken accusing Russia of “weaponizing food.” German Foreign Minister Annalena Baerbock said “whether families in Lebanon, Niger, or Bangladesh can afford their next meal should not depend on the Russian president’s war plans.” Ukrainian Foreign Minister Dmytro Kuleba argued that Russia had planned its move “well in advance.”

Solidarity lanes on steroids: The loss of the Black Sea corridors renews pressure to reroute Ukraine exports by rail, road or waterway transport — an effort the EU supports through so-called solidarity lanes. Poland vowed Sunday “to work further to help Ukraine and those in need to transport essential goods.”

But it isn’t that easy: My colleague Joshua Posaner from POLITICO’s Pro Mobility team argues that the reality looks more grim, as Ukraine’s Deputy Minister for Agrarian Policy Markiyan Dmytrasevych told MEPs earlier this month that the solidarity lanes had reached their maximum export capacity of 3 million tons per month, and remained beset by logistical problems.

What the world will be watching today: The U.N., Ukraine and Turkey pushed forward with a plan that will see 16 Ukrainian grain vessels move through Turkish waters today, despite the Russian withdrawal, according to the Joint Coordination Center in Istanbul.

TANKS, NO TANKS? In the latest episode of the Groundhog Day drama over whether Germany will eventually send modern Western tanks like Leopards or Marders to Ukraine, Mykhailo Podolyak, a close adviser to President Volodymyr Zelenskyy, told Welt am Sonntag that Kyiv and Berlin might soon strike a deal. “We are continuing to work hard on this and are also having successes. I think we will soon find a consensus with our German partners for the tanks,” Podolyak said.

GROWING FRUSTRATION WITH THE SWISS: German Gepard anti-aircraft tanks, of which Berlin has already delivered 30 units to Kyiv, are playing an important role in defending Ukraine against Russian aircraft and drones, but ammunition is running critically low. But Switzerland, to which Germany outsourced production of the missiles for the Gepard’s cannons, continues to refuse to export them to Ukraine, citing its neutrality.

Berlin is not amused: The German defense ministry is raising the pressure, with Minister Christine Lambrecht arguing in a letter to Bern last week that the ammunition should be immediately exported given the Gepard’s important defensive role, such as protecting grain exports from the Odesa port. Some politicians in Berlin are articulating open threats: “Anyone who does not supply an invaded state with ammunition for national defense can no longer be a reliable ammunition supplier for us either,” said defense policy lawmaker Marcus Faber from the FDP, one of Germany’s three ruling parties.

WHO BLEW UP NORD STREAM? Investigations into last month’s explosions that damaged Nord Stream gas pipelines are testing levels of trust among nearby EU states as they weigh whether to share intelligence in efforts to establish the culprit, reports Charlie Duxbury in this top read for POLITICO.

FIALA OP-ED: Even if it wins the war, Ukraine will still have to live next door to Russia, and ensuring long-term stability, justice and post-war reconstruction will continue to be a challenge, writes Czech Prime Minister Petr Fiala in this opinion piece for POLITICO. “The international community’s main task will then be to find a solution to ensure true peace, and not allow for a frozen or smoldering conflict on Europe’s borders that would pose a permanent threat,” he argues.

**Do not miss MEP Sirpa Pietikäinen (EPP, Finland) at POLITICO’s Spotlight “Chronically underserved – bridging the gap in chronic care” on November 9 at 3:30 p.m. CET. This event will take a critical look at the challenges that people with chronic diseases have to face and how the revamp of pharmaceutical rules can improve their access to care and quality of life. Register now!**

IN OTHER NEWS       

GREEK SPYING SCANDAL BACK IN THE SPOTLIGHT: Two reports in the Greek press over the weekend have resurfaced the eavesdropping scandal that has engulfed the country’s conservative New Democracy government, our colleague Nektaria Stamouli writes in to report. According to the reports, more political figures — including members of the Greek Cabinet — have been under surveillance than previously known. The reports come as a delegation from the European Parliament’s inquiry committee into Pegasus and other spyware prepares to visit Cyprus and Greece this week.

Refresher: In August, Greek Prime Minister Kyriakos Mitsotakis’ government acknowledged opposition leader (and MEP) Nikos Androulakis’ phone had been wiretapped — a move it called legal but wrong. Two senior officials — the government’s chief of staff Grigoris Dimitriadis and the head of the country’s National Intelligence Service (EYP) Panagiotis Kontoleon — were forced out of their jobs. The saga morphed into an espionage thriller that involved controversial Predator spyware being planted on the phones of an ever-expanding network of politicians and journalists.

More politicians under surveillance: Greek newspaper Ta Nea has now revealed that one minister from the current government “who seems to have had less-than-good relations with the prime minister’s associates, seems to have been recorded — possibly using the Predator spyware.” The paper added that another member of the ruling party in the spring of 2021 detected a text containing a malicious link and deactivated the device he was using at the time. Government spokesman Giannis Oikonomou said the article is speculative and lacked names and concrete facts.

Meanwhile, the To Vima newspaper described how Predator was activated in Greece as a result of a “bridge” of contacts established between Greece and Cyprus. The people “involved in the negotiations seems to have been known to Grigoris Dimitriadis or people from his personal circle,” the report said, adding that he denies those claims.

More journalists under surveillance: Greek investigative journalist Tasos Telloglou published an article claiming he was followed and physically surveilled between May and August 2022, while he was reporting on the spyware scandal. Telloglou claimed that at least three other Greek reporters working on the story for independent media outlets were monitored by authorities.

Calls for action: Reporters without Borders and the International Press Institute called for an immediate investigation into the latest allegations. An Athens journalists’ union said the fact the reporters investigating the scandal are allegedly victims of surveillance themselves “mirrors a dystopia that journalists and their elected representatives cannot tolerate.”

EYE ON ANKARA: Turkey’s energy deal with Libya this month is ratcheting up the dangers of open conflict between Ankara and Athens, reports Nektaria Stamouli.

MEPs HEAD TO TAIWAN: A group of MEPs (among them Reinhard Bütikofer and Sjoerd Sjoerdsma, who have both been sanctioned by Beijing), are set to arrive in Taiwan on Tuesday, amid growing concern over China’s plans for the self-ruling island, reports our colleague Stuart Lau.

DENMARK IS LØKKED AND LOADED AGAIN: As Danes head to the ballot boxes on Tuesday, former PM Lars Løkke Rasmussen is back at the center of Danish politics, with his new party surging to third place in the polls, making him indispensable for coalition talks. Eline Schaart has more.

SO MUCH FOR UK CLIMATE AMBITIONS: Britain has failed to pay out more than $300 million it promised to two key climate funds, reports our colleague Karl Mathiesen.

MUSKY BUSINESS: Would you pay $20 a month to be verified on Twitter? Elon Musk seems to think so — the Verge reports Musk wants to change Twitter Blue, the optional $4.99 a month service that unlocks additional features, into a more expensive subscription that also verifies users.

**POLITICO Pro’s Morning Energy and Climate Newsletter is the daily political brief for anyone with a stake in COP27. Let our reporting team bring you all the latest from the event. Sign up now to receive the newsletter for free from November 7 to 18.**

AGENDA       

Central European Time/Brussels time.

— EU trade ministers meet for informal summit in Prague, with U.S. Trade Representative Katherine Tai attending as a guest. Arrivals from 8 a.m.; press conference at about 2:20 p.m. Watch.

— EU Competition Commissioner Margrethe Vestager in Odense, Denmark; delivers keynote speech at the Danish Municipal Leaders’ annual conference.

— EU High Representative Josep Borrell continues Argentina visit.

— European Parliament President Roberta Metsola delivers address at the Junior Chamber International Malta European Meet-Up at 10 a.m.

— Eurostat publishes EU flash estimates for October inflation in the eurozone and third-quarter EU GDP.

BRUSSELS CORNER       

CELEBRATING THE DAY OF THE DEAD: If you’re in Brussels and into celebrating Halloween as they do in Oaxaca, Mexico — with lots of face-painting, traditional food and dancing — don’t miss the Día de Muertos activities this week, which culminate in a big procession through the Marolles neighborhood on Saturday. Info here.

BIRTHDAYS: Former Belgian PM and Council President Herman Van Rompuy, who turns 75; Former MEPs John Howarth and Rupert Lowe; Italy’s former Deputy PM Angelino Alfano.

THANKS TO: Our producer Grace Stranger.

**A message from the European Commission (Directorate-General for Employment, Social Affairs and Inclusion): Energy prices are skyrocketing, and people feel it. Let’s put our heads together to build a greener world that doesn’t leave anyone out in the cold. Share your ideas at the #EUSocialForum: eusocialforum.eu/eu/begin.**

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