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Week Ahead (17 January)

Monday, 17 January – Vote on new President of the European Parliament to take place

The European Parliament will meet in plenary session this week, with its main task the election of a new President for a two-and-a-half-year term. David Sassoli, the Socialists and Democrats MEP who had been elected President in 2019, died last week after a short illness. His term as President would expire this week, and he had in any case indicated that he would not seek re-election.

Barring surprises, the leading candidate to take over from Sassoli is Roberta Metsola, a Maltese MEP from the European People's Party, who has been acting President of the European Parliament since Sassoli's death. Metsola is vying for the presidency after the EPP voted her as the party's candidate for the presidential election on November 24. In a first, the new President will be elected via a remote vote after Metsola, in her capacity as Acting President, overruled Sassoli's December decision to hold an in-person vote.

W/C Monday, 17 January - Investigation into Boris Johnson's party attendance to be carried out

Senior civil servant Sue Gray will this week complete her investigation into the attendance of Boris Johnson at a drinks reception at Downing Street in May 2020, at the height of the first wave of the pandemic, which has prompted anger. After apologising in the Commons, last week the Prime Minister was roundly condemned from the opposition benches, and a revolt against his leadership took place among the Scottish Conservative Party, which called on him to resign. While Johnson's cabinet back his apology, it is understood that the Conservative backbench 1922 Committee, chaired by Graham Brady, has received several letters of no confidence in Johnson since the apology was issued.

The results of Ms Gray's investigation may hasten Johnson's departure from Downing Street, especially given that news has also emerged of a further two parties held during lockdowns, including one held the night before the funeral of Prince Phillip. While many MPs have said they will await the outcome of the investigation before deciding on their next steps, Johnson is in an increasingly difficult position. Should the 1922 Committee receive 54 letters of no confidence, a vote would be held on his leadership. As Conservative MPs go back to their constituencies this weekend, they are likely to gauge the anger of their voters and may be persuaded to write to the committee in the coming week.

Tuesday, 18 January - ECOFIN to discuss global minimum corporate tax

ECOFIN will meet on Tuesday, with the implementation of the OECD-level agreement on a global minimum corporation tax on the agenda. A proposal on the implementation of the OECD global agreement on re-allocation of taxing rights is scheduled for 27 July 2022.   

The deal struck at OECD level is two-pronged.  A levy on the world's 100 largest companies will be introduced; these companies will be forced to pay tax on profits in all jurisdictions in which they have operations.  It is understood that the tax will apply to multinationals with annual revenue of $20 billion or more.  The second pillar will introduce a 15% minimum corporation tax rate for companies with annual revenue of €750 million or more.

A document leaked last week suggest that the EU could raise revenues of up to €4 billion per annum from the first pillar of the agreement from 2023. Money raised will go towards financing the €800 billion recovery fund. Revenues from other initiatives included in last year's own resources decision were also estimated in the document, and include €500 million from the carbon border tax and up to €9 billion from an extension of the cap-and-trade carbon market.

Wednesday, 19 January – Emmanuel Macron to address European Parliament to mark France’s assumption of EU presidency

On Wednesday the French President, Emmanuel Macron, will address the European Parliament’s plenary session to mark the beginning of his country’s six-month Council of the European Union Presidency.

In December Macron revealed that the French programme will focus on a reform of rules governing the Schengen area (echoing the Commission's proposal on police co-operation among member states announced recently); a focus on the reform of the budgetary framework (to include the question of the future of the 3% deficit rule) and a reconciliation of the bloc's climate and economic targets. France will also aim to prioritise a number of trade defence instruments during its presidency of the Council, in particular negotiations on an International Procurement Instrument (IPI), before the presidential election in April.

Thursday, 20 January – ECB Minutes from December’s GC meeting, Eurostat HICP inflation rate data to be released

The ECB will release the minutes of its December Governing Council meeting on Thursday. Market participants will be on the look-out for further evidence of divisions among members of the Governing Council which may see monetary stimulus unwound quicker than anticipated. In December the central bank announced that, as planned, it would end the Pandemic Emergency Purchase Programme, PEPP, but that it would double its regular Asset Purchase Programme, APP, on a temporary basis to soften the impact of the end of its emergency bond-buying scheme.

The Eurostat HICP inflation rate data for December will also be released on Thursday. Flash readings for the month, released on 7 January, showed that inflation had hit 5.0% in December in the eurozone, up marginally from the 4.9% recorded in November. As in previous months, energy is again expected to have the highest annual rate in December (26.0%, compared with 27.5% in November), as costs for oil and gas increase steadily. The flash results suggest that core inflation, which excludes volatile items such as energy, food, tobacco and alcohol, is at 2.6%, well above the European Central Bank's target of 2%.

The ECB, which has maintained that the current inflationary scenario is temporary, will hold its next Governing Council meeting on 3 February. Hawkish elements of the GC have said for some months that the record high rate of inflation is further evidence that the ECB must commit to winding down monetary stimulus in 2022. President Christine Lagarde has said that an interest rate hike is "unlikely" this year, but that she would take action quickly should the need arise.

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