Week Ahead (11 July)

Monday, 11 July - Eurogroup to meet to discuss progress towards digital euro

The Eurogroup will meet today, with further talks on the future of the proposed digital euro on the agenda, focusing on the potential impacts a Central Bank Digital Currency could have on the financial sector and on the use of cash. Since the matter was last discussed at Eurogroup level a public consultation in advance of the introduction of formal legislative proposals for the CBDC has closed. The consultation, opened on 5 April, sought the views of European citizens on a range of issues associated with the Central Bank Digital Currency proposed by the ECB, including views on data protection and privacy, Anti-Money Laundering (AML) and Combatting the Financing of Terrorism (CFT) rules, the impact on financial stability and users’ needs and expectations.

At its meeting at the beginning of April the Eurogroup discussed trade-offs in the design of a digital euro between privacy and other policy objectives, focusing on privacy considerations and how they square with other policy objectives, such as countering money laundering, illicit financing and tax evasion. The ECB's investigation phase of the implementation of a digital euro will run until October, with suggestions that a person-to-person payment solution featuring the CBDC could be launched in 2026.

W/C Monday, 11 July - Conservative Party enters unpredictable leadership struggle following Boris Johnson’s resignation

UK politics enter a new phase this week, following the resignation of Prime Minister Boris Johnson yesterday after weeks of political turmoil and a series of scandals. Johnson was forced to resign under heavy pressure from lawmakers from his own party. At least 54 officials, including several high-profile members of his Cabinet, including former health secretary Savid Javid and Chancellor Rishi Sunak, resigned.

Johnson plans to continue as a caretaker minister until a replacement is chosen, most likely in Autumn, and has pledged not to seek any major legislative changes, including on taxes, within that period. Today, the 1922 committee will elect a new executive who will approve the process for the leadership election. According to the current rules, an MP only needs the backing of 8 other MPs to run for leadership, however, the rules are subject to changes by the 1992 committee.

Many candidates have already announced their intentions to stand for the leadership role include foreign secretary Liz Truss, former health secretary Jeremy Hunt, current Chancellor Nadhim Zahawi, and the trade minister and former defence secretary Penny Mordaunt. Former Chancellor Rishi Sunak is also among the favourites for the position according to the latest survey.

W/C Monday, 11 July - Russia considers ending gas supplies to Europe, as Nord Stream 1 goes offline for 10 days of ‘’routine maintenance’’ on Monday

Russia is understood to be considering turning off the taps supplying gas to the European Union this week, as the Nord Stream 1 pipeline is scheduled to go offline for 10 days due to routine maintenance on Monday. The fear of such a move was reflected in a German decision to introduce a draft bill on Tuesday which would allow it to provide emergency funding for energy companies that might be affected by the record-high prices of gas and cuts in gas supplies from Russia.

Even though the pipeline is scheduled to temporarily go offline due to routine maintenance, there are increasing fears that Gazprom could extend the shut-down of the pipeline, using annual maintenance as a pretence for retaliation for the economic sanctions imposed by Europe against Russian entities. Last month, Russia reduced its gas deliveries to Germany via the Nord Stream 1 pipeline by 60%.

Tuesday, 12 July – The Irish government faces motion of no confidence

The governmental coalition in Ireland will face a motion of no confidence ahead of the Dáil recess this week.

The President of Sinn Fein, Mary Lou McDonald, confirmed last Friday that her party will table a motion of no confidence this week, following the resignation of Fine Gael TD Joe McHugh that saw the three-party governmental coalition losing its parliamentary majority with 79 out of 159 TDs in the Dáil. The government still enjoys a working majority due to the support of Independent TDs, although their appetite for supporting the government in the midst of a cost of living crisis remains to be seen.

Tuesday, 12 July - Push to reach agreement on minimum global corporation tax at ECOFIN

European finance ministers will attempt to secure an agreement on the issue of a minimum global corporation tax on Tuesday. There have been several abortive attempts at finalising the legislation underpinning the EU's response to the OECD-level agreement to increase corporation tax to a minimum of 15% globally.

Tuesday's meeting will be the first attempt of the Czech presidency of the Council of the European Union to break the impasse; it will progress with the negotiations with the European Parliament's resolution on the issue last week in mind. The resolution, which is non-binding, urged member states and the Commission to make use of all possible tools, referencing Article 116 which would allow the bypassing of unanimous consent in favour of qualified majority voting (QMV).

The long-term future of the overall OECD deal is uncertain. Its terms must be implemented in all OECD member states, but this will face a major hurdle should, as forecast, the Republican Party in the United States wins back control of Congress in the forthcoming midterm elections. The party is wary of a global deal which could impact on the tax liabilities of American companies and may reject or seek a major revision of the agreement should it regain the lower house.

Wednesday, 13 July – Friday 15 July – Inflation data for three biggest Eurozone countries to be published

The latest Consumer Prices Index (CPI) data for Germany, France (Wednesday), and Italy (Friday) will be published this week.

This week’s announcements will be particularly important as an indicator for the rest of the Eurozone members and whether the cost-of-living crisis is peaking, given the size of the three economies and their status as the three biggest countries in the Eurozone. In May, Eurozone inflation hit another record high at 8.1%, as the war in Ukraine continues.