Week Ahead (12 December)

W/C, Monday, 12 December – European Commission to publish its preliminary decision on transatlantic data transfer

The European Commission is expected to announce its draft adequacy decision on transatlantic data transfers this week. More specifically, the Commission will assess whether the U.S executive order on transatlantic data transfers, signed by President Biden on 7 October, meets the EU standards. The new U.S Data Privacy Framework aims to address the EU’s long-standing concerns over U.S surveillance practices and to make it easier for U.S companies to transfer personal data from the EU to the U.S by ensuring that data transfer flows between the EU and the U.S continue without violating the standards set by the EU Court of Justice in 2020.

Although the European Commission is expected to announce its backing of the new U.S Data Privacy Framework, it could once again be challenged at the CJEU by European privacy advocates, further delaying its enforcement. Furthermore, the 27 national data protection agencies of member states will first have to provide their non-binding feedback to the adequacy agreement ahead of the Commission’s final announcement expected during Q1 2023. The EU’s political will to back a ‘’Privacy Shield 2.0’’ could also be distorted by the ongoing transatlantic row over the US’ protectionist subsidy scheme, the Inflation Reduction Act of 2022.

Monday, 12 December – Employment Committee of the European Parliament to vote on the platform workers directive

Today, the Employment and Social Affairs Committee of the European Parliament will vote on the Platform Workers Directive, a Commission’s proposal presented last December that aims to reclassify ‘’gig workers’’ as employees entitled to minimum wage and legal protection. The Employment Committee was expected to hold a vote on the proposed Directive on 30 November, however, MEPs remained divided on the criteria needed to define a ‘’gig worker’’.

However, the European Parliament managed to reach a compromise on a political deal last week, after the S&D group added more references to national competence and national law to bridge the gap with the more liberal MEPs who also had to accept that the criteria to motivate legal presumption would not be included in the original draft. This political agreement, whose details have yet to be outlined, paves the way for the final approval by the Employment Committee today. A plenary vote will follow early next year.

Nevertheless, the EU Council is moving in a different direction, after the EU employment ministers failed to reach a deal on Thursday on the Platform Work Directive with the German minister deciding to abstain.

Tuesday, 13 December – Extraordinary Energy Council to discuss the Commission’s gas price cap proposal

The EU energy ministers will meet on Tuesday to discuss the Council’s latest revision of the Commission’s gas price cap proposal, also known as a ‘’temporary gas market correction mechanism’’ suggesting the introduction of a fixed price ceiling with a price cap immediately activated should the monthly price exceeds a designated rate at the Dutch TTF hub.

In the latest Council compromise, the price celling figure fell from €275 to €220 per MWh. However, EU capitals remain split with Germany, Austria, Denmark, Hungary, and the Netherlands being sceptical of the implication of such a measure for the security of supply.

Last Wednesday’s Coreper discussed the possibility of introducing an automatic suspension of the mechanism as a safeguard for the security of supply, to help ease tensions for a compromise ahead of tomorrow’s Energy Council. Nevertheless, a compromise this week remains far from certain. Over the weekend, ambassadors from 12 member states pushed for an even lower price cap on gas than the latest compromise, calling for a cap at €160 per MWh with a €20 per MWh spread to be applied to all derivatives. Meanwhile, the ECB warned earlier this month that the EU’s plans for a gas price cap could jeopardise ‘’financial stability in the euro area’’.

Thursday, 15 December – European Central Bank to hold monetary policy meeting, a rate hike of 50 basis points widely expected after inflation slowdown in November

The European Central Bank will hold its regular monetary policy meeting in Frankfurt on Thursday to discuss monetary policy, with measures to combat ever-increasing inflation once gain high on the agenda.

Markets widely expect a return to a 50 basis point hike, after two consecutive hikes of 75 basis points and following November’s inflation slowdown to 10%. According to the ECB’s forecast in September, inflation is expected to average 8.1% in 2022, 5.5% in 2023, and 2.3% in 2024. However, on Friday, the ECB will publish its updated macroeconomic forecast, and these figures are expected to be revised upwards.

Overall, markets expect ECB interest rates to peak at around 3% during the first half of 2023. Meanwhile, a Eurozone recession appears increasingly likely. According to the European Commission’s autumn forecast, published last month, GDP in the EU and Eurozone will contract in Q4 and Q1 2023 before returning to modest growth in Q2.

Thursday, 15 December – Bank of England to decide on interest rates

The Monetary Policy Committee of the Bank of England (BoE) will meet on Thursday, with expectations high that it will increase interest rates for the ninth meeting in succession.

BoE interest rates are currently at 3%, after the Bank raised interest rates by 75 basis points in November, the biggest hike in 33 years. It is now widely expected that the Bank will raise its base rate by 50 basis points this week to 3.5%, after inflation jumped to a new 40-year high in October, rising to 11.1%

Inflation levels are currently over five times higher than the BoE’s declared target rate of 2%. Hence, rising interest rates are expected to continue, with analysts estimating that BoE rates could peak between 4% and 5% in Q2 2023.