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Week Ahead (1 March)

Monday, 1 March - TARGET balance statistics to be released

The ECB will today release the latest data on the balances in its TARGET2 mechanism, incorporating data up until the end of January 2021. TARGET2 imbalances have been highlighted as indicative of a return to the malaise which engulfed the Eurozone in 2010/2011.

Certain German commentators like to point to Italy’s TARGET2 imbalances as evidence of danger to the German taxpayer.  Italy’s TARGET2 liability was up to €516 billion in December, up from €494.9 billion in November, its largest amount on record.  The Bundesbank surplus meanwhile stood at €1.136 trillion in December – also a record high.

Tuesday, 2 March - Eurostat flash estimate for inflation to be released

Flash inflation data for February will be released on Tuesday. German consumer price inflation in 7 of the 16 states that have reported so far appears to have surprised modestly to the upside suggesting the Eurozone may follow suit. The Eurostat release on inflation for January showed that Eurozone inflation jumped to 0.9%, from -0.3% the previous month, which was attributed to changes in the methods employed to calculate inflation, including the use of new HICP weighting. Excluding energy, food, alcohol and tobacco, the core euro area inflation rate stood at 1.4% in January.

Wednesday, 3 March – EU ambassadors to sign off on a corporate tax transparency bill despite opposition of Ireland and 7 other EU Member States 

A proposal to force multinationals with annual revenues of over €750 million to reveal their tax payments and activities in each Member State of the European Union, which had been stalled since 2016, will move ahead after a vote by EU employment ministers.  On Wednesday, EU Ambassadors are expected to give formal sign off on the bill which was approved by qualified majority voting. Ireland, Luxembourg, Sweden, Croatia, Cyprus, Czech Republic, Hungary and Malta all voted against the initiative. After sign-off, legislative negotiations can begin with the European Parliament.  The Parliament wants companies to provide their tax details from wherever they operate across the world while the Council’s proposal is limited to their EU activities.   

Wednesday, 3 March - UK Budget 20201 to be delivered

The Chancellor of the Exchequer, Rishi Sunak, will unveil the UK's 2021 budget on Wednesday. While an extension of the furlough scheme and business interruption loans, due to expire at the end of March, are almost certain to feature, less clear is the approach Sunak will take to tax increases. It is understood that the Chancellor is in favour of increasing tax, including the corporation tax rate, which may rise to up to 25% from its current level of 19%. Major reforms on capital gains taxation are also widely expected. A move to increase the corporation tax may be resisted by a group of Conservative rebels; reports indicate that some Cabinet ministers are among those opposed to tax rises at this juncture.

The fallout from the pandemic will dominate the Chancellor's thinking in setting down a budget for the year. Since the outbreak of the crisis the UK government has spent approximately €280 billion on shoring up its economy with emergency supports for businesses and households.

Wednesday, 3 March - Eurozone composite PMI to be released

The latest eurozone composite PMI will be released on Wednesday. The flash result, released on 19 February, suggests that business activity decreased further during the month due to the continued suppression of the services sector across Europe. This represents the fourth month in succession that a decline in activity has been recorded and correlates with the decisions of member state governments to lock down their economies in November in the midst of the latest wave of the pandemic.

The flash Eurozone composite PMI was recorded as 48.1, up slightly from the 47.8 registered in January, however, it is still below the 50.0 mark and represents a further contraction. The rate is much higher, however, than that recorded during the early months of the pandemic, when the index fell to 13.5, which may suggest that the impact of the latest wave of the virus has been less severe.

Thursday, 4 March - Bundeskartellamt Competition Conference to be held

The twentieth annual Bundeskartellamt Competition Conference will be held virtually on Thursday. Keynote speakers at the conference will include the European Commissioner for Competition, Margrethe Vestager, and Peter Altmaier, the German Minister for Economic Affairs and Energy. Progress towards the Digital Markets and Digital Services acts is likely to be discussed, as is the recently launched consultation on the rights of "platform workers" in the digital sphere.

The Bundeskartellamt, Germany’s Federal Cartel Office, has been active in pursuing big tech companies. It has initiated proceedings against Facebook over an allegation that its demand that users of the Oculus virtual reality product have a Facebook account constitute an abuse of its dominant market position, and has imposed restrictions on Facebook’s use of user data in separate abuse of dominance proceeding. It has also opened investigations into how Apple and Amazon treat third-party merchants.

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