The election campaign in Poland kicks off this week. On Tuesday, Poland's president, Andrzej Duda, declared on social media that the country's parliamentary election will take place on 15 October. The election will determine the composition of the 460-seat lower house of parliament (Sejm) and the 100-seat Senate.
The ruling Law and Justice party (PiS), in power since 2015, will focus its campaign on increasing child benefits and border security, while criticising the centre-right Civic Platform (PO) stance on EU and German relations, with an aim to secure an unprecedented third term. On the other hand, PO, the leading opposition power, argues that ousting PiS from power is crucial to unlocking frozen EU funds tied to longstanding rule of law disagreements. Additionally, they will seek to move forward with a series of delayed judicial reforms that have so far prevented Poland from accessing €35.4 billion in recovery funds.
Nevertheless, despite its ongoing standoff with the European Commission over accessing recovery funds, the Polish economy is growing strongly, while also boasting historic low unemployment rates (5% in June).
According to the most recent polls, PiS, in power since 2015, holds a 6% lead over PO with 36% of projected votes. However, current polling suggests that neither the PiS nor PO will win the 231 seats needed for a majority in the lower-house Sejm. This could lead the former to join forces with the far-right and largely eurosceptic Confederation Party, whose popularity has been rising since November. Their recent rise in the polls has seen them overtake The Left and Poland 2050 to become the third most popular party in Poland, currently polling at 13%.
UK consumer price monthly inflation figures for the month of July will be published next week.
One of Rishi Sunak’s five pledges was to halve inflation and he will be hopeful that a global disinflationary trend, alongside the Bank of England’s 14 consecutive rate hikes, bringing rates to 5.25%, will achieve that goal.
Last month, the consumer price index (CPI) rose by 8.2% in the 12 months to June 2023, up from 7.9% in May. It is projected that inflation will fall to 5.2% by the end of the year and will remain above the 2% inflation target set by the Bank of England (BoE) and remaining there beyond 2028, according to forecasts from the National Institute of Economic and Social Research (NIESR).
Another of Sunak’s five pledges is to get the economy growing again. There was good news on that front with ONS data released last Friday showing that the UK economy grew by 0.5% in June after a 0.1% contraction in May.
On Wednesday Eurostat will release its latest flash estimate of GDP and employment statistics for Q2 2023. Data from Q1 showed that GDP growth rates increased from -0.1 % to 0.0% for the eurozone, while GDP for the EU also increased from 0.1 % to 0.2%.
Employment decreased from 0.6% to 0.5% for the eurozone, while employment for the EU as a whole remained unchanged at 0.5%. This is compared to Q4 2022, where employment increased by 0.3% across the EU and eurozone. Overall, the EU is experiencing record-low unemployment rates, with unemployment at 5.9% across June and July, the lowest since 2000. The release of Q2 employment statistics by Eurostat should reflect this data.
In its Spring Economic Forecast, the European Commission revised growth for the Eurozone up to 1.1% and 1.6% in 2023 and 2024, respectively. However, the Commission’s growth forecast relies on the technical assumption that Russia’s aggression against Ukraine will not further escalate. Moreover, regardless of the volatility of energy prices, the overall geopolitical uncertainty, coupled with the ongoing restrictive monetary policy and stubborn core inflation could set the eurozone’s sluggish economic growth in the coming months at risk. Furthermore, the eurozone’s largest economy, Germany, is expected to have zero growth in 2023 after entering into recession earlier this year, with implications for the growth prospects of the entire bloc. All the above could prompt the European Central Bank (ECB) to rethink its hiking campaign at the meeting of its Governing Council next month.
Spanish MPs will return to parliament this week following July’s inconclusive election. As a reminder, the centre-right Partido Popular (PP) won the most seats (137) with Prime Minister Pedro Sanchez's PSOE securing 121 seats. Despite coming first, PP’s 137 seats underperformed expectations and its path to power was further complicated by the poor performance of Vox, its most likely partner in a right-wing coalition, which lost 19 seats to finish with 33.
With 176 seats required for a majority, there is no clear pathway to power, although Sanchez looks more likely to be able to secure the support of MPs from regional and secessionist parties.
PP leader Alberto Núñez Feijóo has made efforts to secure a path to power, writing to Sanchez on 30 July to request a meeting to negotiate a solution which would allow the political forces with “the greatest citizen support” to govern.
Sánchez responded by reminding Feijóo of Article 99 of the Constitution which stipulates that the candidate which receives the necessary support in parliament, rather than via the popular vote, governs. He also highlighted the fact that PP and Vox have joined forces to govern in several regional parliaments through the same mechanism. He instead proposed a meeting following the constitution of parliament on 17 August after which the King should propose a candidate to become Prime Minister.
For Sanchez, it is highly likely that the support of Catalan nationalist party Junts’ 7 MPs will be required if he is to return as Prime Minister. To that end, he will need to open negotiations with Junts party leader Carles Puidgemont who remains in exile in Belgium as he is wanted by the Spanish legal system for his party in the 2017 independence referendum. In exchange, Puigdemont is likely to demand at a minimum an amnesty for all those involved in that referendum plus a pathway towards a fresh independence poll. The latter in particular is likely to be a bridge too far even for the left leaning Sanchez. Therefore with no clear pathway to government formation another election remains a distinct possibility. Negotiations will get underway in earnest this week.
Comments