European citizens may get a sense of deja-vu today when harsh new measures go into effect designed to stem a dizzying rise in coronavirus infections. Italy introduced the strongest restrictions since May; Spain imposed a national curfew and will seek emergency powers for six months; and Brussels announced even tighter curbs than those already in place nationwide. The virus also continued to seep into the highest offices, with Polish President Andrzej Duda and Bulgarian Prime Minister Boyko Borissov testing positive. EU leaders are holding a virtual meeting on the crisis later this week, their physical distance serving as yet another reminder that the situation in the region is getting out of control.

What’s Happening
Health Check | Three G7 interest-rate decisions, along with data accounting for 40% of global GDP, will provide a temperature check for the world economy this week. The ECB meeting on Thursday will be dominated by discussions on the impact that the sudden resurgence of the pandemic could have on the recovery — and whether more stimulus is already needed.

Deal Hopes | The latest trade talks between Britain and the EU have been extended into the middle of this week, as the U.K. government indicated optimism about a deal. While that's a sign that an accord may be within reach, officials still warn that more concessions are needed.

Money Talks | The next round of talks between chief negotiators from the EU Parliament and governments over the bloc's budget are resuming today. While diplomats point to some progress on the thorny issue of rule of law, disagreements still persist over increases in the budget envelope, making delays in the rollout of the EU's landmark recovery fund all but inevitable.

Trade Boss | The EU aims to give the green light today for the endorsement of Nigeria’s Ngozi Okonjo-Iweala to lead the WTO, giving her a big boost as the U.S. backs the only other remaining contender. The decision comes at difficult time for the trade body, which faces headwinds from a U.S.-China trade battle, the pandemic and a hobbled arbitration system.

Airline Woes | The resurgent pandemic is pushing back the recovery in air travel, turning winter into a survival test for carriers now pinning hopes on a spring rebound. Airlines are urging governments to introduce more testing and travel bubbles to help spur demand, with the industry on track to burn through an estimated $77 billion in cash in the second half.

In Case You Missed It
Lithuania Vote | Lithuania’s government was voted out, clearing the path for a center-right coalition of three parties all led by women, early results showed. Prime Minister Saulius Skvernelis’s Farmers and Greens Union fell short in the second round of the Baltic nation’s election after a string of scandals and amid surging Covid-19 infections.

New Strains | France is recalling its ambassador in Ankara after Turkish President Recep Tayyip Erdogan criticized Emmanuel Macron’s policy toward Islam and said the French president needed “mental treatment.” Tensions between the two countries have been escalating as France mourns the murder of a teacher by an Islamist, followed by a pledge by Macron to crack down on radical Islam.

Getting Pricy | Supermarket prices in Britain may start rising in coming months as food supplies get pummeled by a triple whammy of Brexit, Covid-19 and weather-struck harvests. Just weeks before the U.K. leaves the EU’s single market, it risks steep import taxes on EU products at the same time as grocers are seeking to ward off renewed stockpiling.

Payout Ban | European banking regulators, who had been moving closer to lifting a de-facto ban on dividends, are now increasingly worried about the worsening economic outlook and its impact on balance sheets. The ECB’s supervisory board remains divided on the matter.

Europe’s primary bond market has surpassed 50 billion euros in weekly sales for the 11th time this year — a tally equal to the previous five years combined. More than a quarter of weeks in 2020 have beaten the benchmark as the coronavirus spurs an unprecedented 1.5 trillion-euro fundraising deluge. The EU joined the flood last week with a 17 billion-euro deal, followed by Italy’s seventh jumbo sale of the year.

Today’s Agenda
All times CET.

• EU Commission, EU Parliament and Council of the EU negotiators continue talks aimed at reaching a deal over the bloc's next multiannual budget and recovery fund

• EU climate chief Timmermans participates via video conference in the ‘the International Energy Agency's Big IdEAs series' and in the special edition of the European Sustainable Development Goals Summit

• EU health chief Kyriakides delivers a virtual speech at the World Health Summit and at the EU Health Summit 2020

• EU Parliament's Internal Market and Consumer Protection Committee will vote to ask the EU Commission to establish a consumers’ “right to repair”

• EU Commission Chief von der Leyen holds talks with Spanish regional presidents and Premier Sánchez on rescue packages

• German Ifo business sentiment, Bundesbank monthly report