The European Central Bank is ready to respond to market stress when net bond-buying finally ends this week. President Christine Lagarde said policy makers will be flexible in how they roll over debt maturing in their 1.7 trillion-euro pandemic portfolio, in a nod to Italy where bond yields have risen sharply as the ECB prepares to raise interest rates. The bank is allowing ample leeway for those reinvestments — the first defense until a new tool will be considered in July — rather than imposing targets or thresholds, we’ve been told.

— Lyubov Pronina and Jana Randow

What’s Happening

Brexit Tensions | Speaking at Bloomberg’s London office yesterday evening, the EU’s chief Brexit negotiator Maros Sefcovic said he won’t contemplate a hard border on the island of Ireland, while suggesting that the UK’s plan to override the part of the Brexit deal governing trade in Northern Ireland may harm European cooperation with Britain on financial services. 

Alliance Invite | NATO leaders formally invited Sweden and Finland to join the alliance. Membership for the two previously neutral countries would mark a significant shift in the European security landscape after Russia’s invasion of Ukraine, and offer more protection to the exposed Baltic countries on NATO’s eastern frontier.

Johnson vs Macron | French President Emmanuel Macron unveiled his ambitions for a broad European political grouping last month. But UK Prime Minister Boris Johnson appears to have taken ownership of it, and wants to include Turkey. 

LNG Boost | Already booming as Europe seeks to cut its energy dependence on Russia, investments in liquefied natural gas are set to get another boost. More than 20 European LNG projects have been announced or accelerated since March, with the potential to replace about 80% of total imports from Russia in 2021, according to FTI Consulting.

Asset Seizure | Austria is preparing to seize one of Europe’s biggest natural gas-storage depots from Russia’s Gazprom as soon as tomorrow, when a new law enters into force that compels operators to fill the site’s capacity. The Alpine country gets about 80% of its gas from Russia and its export-heavy economy is counting on flows for at least another five years. 

In Case You Missed It

Serbian Rejection | As many as 51% of Serbs would vote against EU membership in a national referendum, while 34% would cast a ballot in favor, according to a June 13-22 survey by Belgrade-based pollster Demostat. The poll shows continued embrace of Russia and President Vladimir Putin even as the nation seeks to join the bloc. 

Inflation Whiplash | European Central Bank policy makers preparing for the first interest-rate increases in more than a decade were handed conflicting signals on the inflation yesterday. Spanish inflation unexpectedly surged to a record 10% for June, while easing off in Germany on cuts in fuel duties and discounted public-transport tickets.

Tobacco Ban | The EU plans to ban flavored heated-tobacco products following a surge in demand as it aims for less than 5% of its population to use tobacco by 2040, the Commission said yesterday. The proposal comes amid a wider crackdown on cigarettes and nicotine.

Cyber Attack | Lithuania’s defense chief Arvydas Anusauskas said the Baltic nation came under an unprecedented cyber attack this week after the government announced it would start blocking the transit of sanctioned goods to the Russian exclave of Kaliningrad. The ministry pointed to the Russian hacker group Killnet as the source of so-called distributed denial-of-service attacks against state institutions.

Chart of the Day

Europe is rushing to rebuild natural gas reserves amid deep cuts in Russian supplies, but it’s walking a thin line to avoid a winter energy crisis.
With a target of ensuring inventories are 80% full by Nov. 1, EU countries are boosting energy savings, buying more liquefied natural gas and subsidizing the rapid restocking of storage sites. It may not be enough. Nations such as Germany aren’t ruling out further flow cuts from Russia, which has already more than halved deliveries via the key Nord Stream pipeline. And while storage filling rates are on track to hit 90% by November, the EU still faces a range of obstacles in meeting its gas reserves goal. 

Today’s Agenda
All times CET.

• 12:15 p.m. NATO Chief Jens Stoltenberg holds news conference in Madrid
• Justice Commissioner Didier Reynders and EU Jobs Commissioner Nicolas Schmit speak at the EU Digital Summit
• Energy Commissioner Kadri Simson speaks at the MEF Energy Forum 2022