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Week Ahead (15 June)

W/C Monday, 15 June - Irish parties on the verge of agreeing programme for government

More than four months after the general election, Fine Gael (FG), Fianna Fáil (FF) and the Green Party (GP) are on the brink of agreement on a programme for government. Major sticking points between the parties appear to have been resolved, and a draft document leaked on Sunday evening shows agreement on an agenda influenced strongly by the GP. Proposals include extensive expenditure on walking and cycling infrastructure at the expense of the road network, extensive greenhouse gas reduction measures and an end to the direct provision system for housing asylum seekers. The agreement has not been signed off on by party leaders at the time of writing as several issues remain outstanding, including FG's demand for a commitment to tax cuts and disagreement on the pension age. However, it is expected that agreement will be reached on those issues today.

Even if agreement on the programme for government is confirmed, there are hurdles to overcome before a new government can be sworn in. The three parties have separate ratification processes involving wider party memberships. Ratification by the GP is widely seen as the biggest obstacle to the formation of a new government, as it requires a two thirds majority of its party membership.

Monday, June 15 - Greece to Reopen its Borders

Greece is set to reopen its borders on 15 June 2020 to a limited number of countries, in an attempt to kickstart the country’s moribund tourism industry following lockdown with the Covid-19 outbreak. Under Phase 2 of reopening its borders, from today, passengers will be able to fly into Athens and Thessaloniki from 29 countries which have managed to control the virus. This move will be critical to the revival of the Greek economy, as tourism accounts for 20% of the country’s GDP and 43% of the country’s service exports.

Monday, 15 June - Johnson and von der Leyen aim to kickstart stalled trade negotiations

The UK Prime Minister, Boris Johnson, and the President of the European Commission, Ursula von der Leyen, will meet today via video-link in an attempt to unlock the stalled talks on a trade deal. The President of the European Council, Charles Michel, and the President of the European Parliament, David Sassoli, will also be on the call. The renewed focus on the trade negotiations comes as the UK announced that its GDP shrunk by 20.4% in April, a contraction more than three times larger than that endured during the financial crisis of 2008.

Wednesday, 17 June - Eurostat HICP inflation figures to be released

Eurostat’s Harmonised Index of Consumer Prices report is scheduled for release on 17 June. The flash estimate for May showed that inflation stands at 0.1%, down from 0.3% in April. At the most recent ECB Governing press conference the ECB President, Christine Lagarde, attributed this to lower energy price inflation and said that on the basis of current and futures prices for oil, headline inflation is likely to decline further over the coming months and to remain subdued until the end of the year. ECB forecasters have estimated HICP inflation in the baseline scenario at 0.3% in 2020, 0.8% in 2021 and 1.3% in 2022. They had previously forecast rates of 1.2%, 1.4% and 1.5% respectively for each of the years. However, their average long-term inflation expectations remain at 1.7%.

Friday, 19 June - European Council meeting to discuss recovery fund and MFF

The European Council will meet on Friday via videoconference, with the European Commission's proposal for a recovery fund and the new multiannual financial framework due to be discussed. Charles Michel, the European Council President, said last week that the Commission proposals for a recovery fund were an important step towards helping regions and sectors which "need targeted relief without delay".

The discussions are unlikely to be straightforward. It is well known that several member states have taken issue with the ratio of loans to grants proposed in the recovery fund. The Dutch government reiterated its criticisms of the recovery fund last week and confirmed that it would seek changes to the proposals. The Netherlands has also questioned the justification for providing grants rather than loans and called for "structural reforms" in exchange for accessing financial aid.

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