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Week Ahead (11 December)

Tuesday, 12 December - Court of Justice hearing on Illumina’s appeal against the European Commission over its acquisition of Grail 

On Tuesday, the Court of Justice of the European Union (CJEU) is set to hear Illumina’s appeals (joined cases C-611/22 P and C-625/22 P) in its ongoing battle with the European Commission over its acquisition of healthcare start-up Grail. 


The former, a US-based biotech company, had previously attempted to acquire Grail, a cancer-test start-up, under a $7 billion deal.  However, in 2022, the EU antitrust watchdog blocked the deal on concerns that Illumina, after acquiring Grail, would be motivated to impede the latter’s competitors from accessing its technology, potentially stifling the development of competing blood-based early cancer detection test by rival companies The proposed transaction did not meet the turnover thresholds of the EU Merger Regulation, and was not notified in any Member State, but met the criteria for referral under Article 22 of the EU Merger Regulation.  


Subsequently, Illumina took legal action against the Commission, arguing that the EU regulator lacks jurisdiction to block the acquisition since Grail has not conducted any business on the continent. In September 2022, Illumina filed an appeal to the Court of Justice, the EU’s top court, against the ruling of the General Court confirming the EU’s jurisdiction over the deal and has filed another appeal against the Commission’s decision to block the deal. This week’s hearing will examine both complaints with a decision expected next year. 


Thursday, 14 December - Court of Justice of the EU to rule on Luxembourg’s case of state aid to Amazon 

On Thursday, the CJEU is expected to announce its ruling on Luxembourg’s case of state aid to Amazon (C-457/21 P Commission v Luxembourg and Others). 


In October 2017 Margrethe Vestager, the European Competition Commissioner, announced that Amazon had benefited from a Luxembourgish tax scheme that contravened state aid rules. The Commission confirmed in September 2018 that these back taxes, plus interest, had been gathered from Amazon. The Commission also said that Luxembourg had permitted the US giant to channel profits through a holding company tax-free, allowing it to avoid tax on three-quarters of all profits booked in EU. 


However, in May 2021, the European General Court overruled the decision, arguing that the European Commission's decision to demand that Amazon pay €250 million in unpaid taxes to Luxembourg was based on an analysis ‘’incorrect in several respects’’.  Subsequently, the Commission appealed to the CJEU, the EU’s highest court. Earlier this year, Amazon’s legal representative told the CJEU that the Commission’s appeal lacked merit and used the wrong reference framework to determine whether Amazon had a selective advantage. 


Furthermore, in June, Juliane Kokott, the advocate general of the Court of Justice of the EU (EUCJ) issued her non-binding opinion on the case, arguing that Amazon should not pay $268 million in Luxembourg back taxes, arguing that the Commission was mistaken in determining that Luxembourg had granted unauthorised state aid to Amazon. The Advocate General’s ruling is not binding but the Court tends to follow their recommendations. Hence, this week’s ruling will most likely reflect the recommendation’s key point upholding the General Court’s judgment annulling the EU decision. This means that the EU antitrust authority could face another blow in its battle against corporate tax state aid cases, following the CJEU’s ruling last week against the Commission’s finding that Luxembourg had granted illegal state aid to Engie. 


Thursday, 14 December – ECB Governing Council to hold monetary policy meeting, expected to keep rates unchanged for a second consecutive time amid worsening economic outlook 

On Thursday, the ECB Governing Council (GC) meets to decide the next steps for Eurozone interest rates with a second consecutive pause in rates priced in. The meeting comes only two weeks after Eurostat released its November inflation data which showed inflation in the eurozone dropped to 2.4%, down from 2.9% in October, moving closer to the ECB’s 2% target.  Yet, core inflation remained at 3.6%. 


In its previous monetary policy meeting on 26 October, the ECB kept interest rates at its record high of 4%, ending its rate hike cycle following ten consecutive interest rate hikes within 14 months. In light of the latest encouraging figures, ECB’s board member Isabel Schnabel admitted that any interest rate hike should be off the table, departing from her earlier more hawkish stance on rates. 


Schabel’s recent comments coupled with a worsening European economic outlook have fueled expectations of a more dovish stance in the next months. Indicatively, a slim majority of economists (51 of 90) predict at least one rate cut in Q2, earlier than originally expected. Although initially priced by the market for July, this could happen as soon as April, with the ECB becoming the first major central bank to ease interest rates.   


Thursday, 14 December – Bank of England committee to decide on interest rates; expected to keep them at 5.25% for third consecutive time  

The Monetary Policy Committee (MCP) of the Bank of England (BoE) will meet on Thursday, with a third consecutive pause in rates priced in. 


On 2 November, decided to keep interest rates on hold for the second time in a row, following 14 consecutive meetings from December 2021 to August 2023 where rates were increased. The Bank's monetary policy committee voted to maintain its key interest rate at 5.25%, which is already the highest level since the 2008 financial crisis. The decision to pause rate hikes in September came after inflation unexpectedly fell to 6.7% in August.  


After remaining unchanged in September, inflation cooled more than expected in October, dropping to 4.6%, its lowest level in two years. Nevertheless, the UK’s inflation rate is still projected to remain above the BoE's 2% target for an extended period, despite the signs of a stagnant economy.  According to a Reuters survey conducted earlier in December, all but one of the 68 economists do not expect the Bank to make any changes to interest rates this week. However, there is uncertainty regarding when the BoE will initiate easing.  


In contrast with the ECB, market consensus is that this will not happen before the first half of 2024, as inflation levels are still more than two times higher than BoE’s target.  Despite the surprising easing of inflation in October, a majority of economists now anticipate only a 25-basis point cut in Q3 2024, compared to the previously expected 50-basis points in a November poll. This less dovish prediction came after BoE’s Governor Andrew Bailey stated that the Bank would do ‘’what it takes’’ to get inflation to its 2% target. 


Thursday, 14 December - Friday, 15 December – European Council to discuss enlargement, and revised long-term EU budget to support Ukraine’s financial needs 

This week, the European Council will be held in Brussels, the final under the Spanish Presidency, in order to discuss inter alia enlargement, the bloc’s financial support for Ukraine, as well as the proposed revision of the Multiannual Financial Framework for 2021-2027, with a view to reach an agreement. 


In November, the European Commission recommended initiating EU membership talks with Ukraine, Moldova, and Bosnia & Herzegovina, subject to conditions related to corruption, lobbying laws, and safeguards for national minorities, marking a crucial step toward Kyiv's strategic goal amid ongoing efforts to counter Russia's invasion.  


Ukraine continues to largely depend on Western economic aid to continue financing its war campaign and its macroeconomic needs, facing a $29 billion budget deficit for 2024 as EU aid is set to run out in December, while the Commission has pledged a €66 billion aid package for the next four years.  To that end, the EU leaders will also aim to reach a deal on the mid-term revision of the EU’s long-term budget, aimed at facilitating financial support for Kyiv among other key financing needs. However, Hungary's Viktor Orban opposes additional funding due to corruption concerns, urging the removal of the accession negotiations from the agenda. It remains to be seen whether the increased lobbying of other European leaders, including French President Emmanuel Macron, will be enough to convince Budapest to drop a veto following the inconclusive meeting of EU ambassadors yesterday. 


The Spanish presidency has also proposed a significant reduction to €2.5 billion from the Commission's initial request of €10 billion for the Strategic Technologies for Europe Platform, part of a compromise deal. However, Northern European countries have expressed concerns about the lack of proposals in the Spanish document to reallocate funds from the agreed 2021-2027 budget to finance new priorities. Last week, Spain suggested using revenues from Russian frozen assets to support Ukraine but the plan was rejected by fellow EU member states. 




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