(Bloomberg) -- Welcome to the Brussels Edition, Bloomberg’s daily briefing on what matters most in the heart of the European Union.

After more than 14 years in office, Angela Merkel is in her element as she returns to the frontline of crisis fighting: Polls show a surge in support for her party and broad public approval of her policies. Yet history may judge her less on her custody of Europe’s powerhouse economy than on what she does to help the region’s weakest members through an unparalleled public-health disaster. Merkel’s dilemma is whether she goes all out to help the bloc emerge intact from the pandemic or risk it splintering along national lines. Being at the center of a crisis is a familiar position for the chancellor, only now every country is affected and the threat to the EU’s integrity even more palpable.

What’s Happening

Virus Update | After a brief respite, bad news came out of Spain again, while a new outbreak front seems to be forming in Eastern Europe. The good news is that the number of new coronavirus cases in Italy leveled off at a two-week low. 

Economy’s Pulse | Purchasing Manager Indexes for manufacturing in Italy and Spain are predicted to show dire readings today. Final figures for France, Germany and the euro area as a whole are expected to confirm similarly grim data. 

Faulty Generosity | The EU’s foreign policy chief recently suggested that China may seek to gain influence in Europe during the crisis through spinning and the “politics of generosity.” If that is Beijing’s goal, sending faulty tests to European countries won’t help.

Underground Benefits | Prime Minister Giuseppe Conte is preparing an unprecedented emergency handout for workers trapped in Italy’s underground economy, as his government seeks to stave off the risk of social unrest during a nationwide lockdown. New measures will also include support for temporary layoffs and moves to speed liquidity to companies.

In Case You Missed It

Bank Bonuses | The ECB raised pressure on European banks to scrap dividends for this year in order to protect their capital cushions because of the fast-deteriorating economy. Cutting bonuses could be next on the to-do list.

Hard Power | In a rare joint display of hard power, EU governments formally decided to deploy warships in the Mediterranean to inspect vessels suspected of funneling weapons to and from war-torn Libya. The bloc, which has long wielded soft power with its trading clout, is seeking to show more traditional foreign-policy muscle as unrest afflicts nearby countries.

German Backstop | Germany is considering plans to backstop losses for commercial credit insurers to keep trade flowing and prevent bankruptcies because of the coronavirus outbreak. The economic disruption from the crisis led to German companies filing almost half a million applications for a wage support program in March. 

Early Warning | Dutch scientists were able to find the coronavirus in a city’s wastewater before Covid-19 cases were reported, demonstrating a novel early warning system for the disease. Wastewater surveillance is already a well-established method of detecting poliovirus and antibiotic-resistant bacteria.

Chart of the Day

Euro-area inflation slowed to its weakest pace in five months driven by a collapse in global oil prices. A further softening is likely in the coming months as restrictions imposed to slow the spread of the coronavirus pandemic bring activity across the 19-nation economy into a standstill.

Today’s Agenda

All times CET.

  • 11 a.m. Eurostat to release unemployment reading for February
  • 11 a.m. Pre-ministerial online press conference by NATO Secretary General Jens Stoltenberg 
  • 2 p.m. Press briefing with Ambassador Kay Bailey Hutchison, U.S. permanent representative to NATO
  • Senior euro-area finance-ministry officials discuss response to virus crisis

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