Week Ahead (17 July)

W/C Monday, 17 July – Final week of campaigning in Spain ahead of snap parliamentary elections

Campaigning for the snap parliamentary elections will take place this week in Spain. The elections are scheduled for Sunday, 23 July and will decide the deputies for the 350 seats of the Congress of Deputies. In May, Prime Minister Sánchez surprisingly decided to call snap elections after his party suffered a major setback losing control of several regions and cities, while the conservative Popular Party (PP) emerged victorious in key cities, including Madrid.

Since May 2022, the opposition PP is leading the polls, currently polling at 34%, despite a positive overall economic outlook and a series of recent governmental policies, such as higher minimum wages, basic income, and the country's role in Europe, enjoying broad popularity. PP has capitalised on its new leader’s popularity and the inevitable political cost of the Socialist-led coalition due to the effects of a coronavirus pandemic and an ongoing energy and cost-of-living crisis fuelled by the war in Ukraine. Ruling centre-left PSOE polls at 28%. However, centre-right PP’s lead seems to have further increased following a fierce TV debate last week.

As things currently stand, the PP looks poised to return to power. However, whether it will manage to do so with an absolute majority in the parliament remains to be seen. In the absence of an outright majority, the PP may have no other option than to form a right-wing coalition with the populist far-right party Vox, which is third in the polls with 14%, given the collapse of the centrist Ciudadanos party. Nevertheless, the third place is tightly contested as Vox is currently fighting neck and neck with the recently founded progressive platform Sumar, led by the current Minister of Labour, Yolanda Díaz

Spain’s general elections overlaps with the country’s rotating presidency of the EU after Madrid succeeded Sweden on 1 July. However, Prime Minister Sánchez has assured the EU capitals that Spain’s elections will not disrupt the country’s EU presidency.

Wednesday, 19 July – UK inflation data to be released

On Wednesday, the Office for National Statistics (ONS) will release the UK consumer price monthly inflation figures for June.

The release follows last week’s announcement by the ONS that showed UK gross domestic product (GDP) fell by 0.1% in May, after witnessing growth of 0.2% in April. Darren Morgan, ONS director of economic statistics said: “GDP fell slightly as manufacturing, energy generation and construction all fell back with some industries impacted by one fewer working day than normal.” The extra bank holiday in May reduced overall productivity, however, the decline in GDP was not as steep as expected by some economists who expected a 0.3% drop.

Last month, the ONS showed that inflation in May increased slightly from 7.8% in April to 7.9% in May. In an attempt to decrease inflation, the Bank of England (BoE) has consecutively increased interest rates in order to reach the bank’s declared target rate of 2%. Last month, the Bank raised interest rates to 5%.

Thursday, 20 July – By-elections to take place in three UK parliamentary constituencies

Three by-elections are taking place in the UK this week: In the west London constituency of Uxbridge and South Ruislip, Selby and Ainsty in North Yorkshire, and Somerton and Frome in Somerset. This will be a major test for Rishi Sunak who faces a strong possibility of losing three Conservative party seats which would put the Prime Minister under increasing pressure with a general election expected next year.

The by-elections take place after three MPs announced they were stepping down in the wake of controversies. Former Prime Minister Boris Johnson, who was MP for Uxbridge and South Ruislip, announced he would resign his seat after he was handed a report from a committee of MPs investigating whether he lied to Parliament about Covid lockdown parties in Downing Street. Nigel Adams, MP for Selby and Ainsty, a close ally of Boris Johnson subsequently announced he would be stepping down. The third by-election in Somerton and Frome came about because its former MP, David Warburton, resigned after being convicted of two serious criminal offences.

It is expected that the Labour Party and the Liberal-Democratic Party will pick up these Conservative Party seats. In the former Prime Minister’s constituency of Uxbridge and South Ruislip, Labour Party candidate Danny Beales is at 41%, while Conservative candidate Steve Tuckewell is at 33% according to a poll conducted by JL Partners. While another poll put Labour 12 points ahead in Selby and Ainsty, in North Yorkshire, the constituency of Somerton and Frome, is expected to go to a Liberal Democrat.

Thursday, 20 July – EU Foreign Affairs Council to discuss economic security

On Thursday, EU foreign ministers will meet to discuss the foreign policy dimension of economic security. The meeting will take place only a month after the European Commission unveiled its Economic Security Strategy. This is the EU’s first economic security doctrine, reflecting the bloc’s quest for greater strategic autonomy in critical sectors, after pandemic supply chain shocks and the war in Ukraine prompted its own ‘’geopolitical awakening’’.

Within this context, EU foreign ministers this week will most likely approve the EU’s negotiating mandate for a deal on critical raw materials with the US. Adopted last month at the technical level, it is currently being discussed by EU ambassadors with an eye to having it formally endorsed by the FAC on Thursday.

The Russian aggression against Ukraine and the EU’s relations with Turkey are also on the agenda.