top of page
Search
  • TPA

Week Ahead (17 June)



Monday, 17 June – EU leaders meet to discuss allocation of key EU posts  

Today, EU leaders will have their first post-election official discussion about the allocation of key EU roles at an informal European Council Summit in Brussels. This will set the stage for the European Council Summit on 27-28 June, where the aim is to agree on top positions, including the President of the Commission, the President of the European Council, the High Representative for Foreign Affairs, and the President of the ECB. 

 

As things currently stand, the leading names for the other top EU jobs are the following ones: Former Prime Minister of Portugal Antonio Costa (S&D) for the Presidency of the Council and current Prime Minister of Estonia Kaja Kallas (Renew) for the position of foreign policy Chief, while Roberto Metsola (EPP) is poised to remain the President of the European Parliament. The Latvian government has officially nominated current Executive Vice President and Trade Commissioner Valdis Dombrovskis for a third term in Brussels.  However, he is understood to want to leave his current role as Trade Commissioner, instead heading up a portfolio that would focus on financing Ukraine’s reconstruction and defence needs. 

 

Overall, the leaders’ decision-making process has been expedited quicker than expected, with an agreement on the proposed names for the top jobs likely to be announced next week. Following a discussion with France’s Emmanuel Macron on the margins of the G7 meeting in Italy last week, the German Chancellor Olaf Scholz revealed that ‘’there is every indication that Ursula von der Leyen will be able to serve a second term’’. However, it remains to be seen whether the Commission’s President will manage to secure sufficient support in the European Parliament. 

   

Despite gains by far-right parties, the European Parliament's balance remains largely unchanged, with centrist pro-EU parties (EPP, S&D, and Renew) retaining a majority. In theory, on der Leyen is poised to secure a second term as President of the Commission, supported by around 407 votes from these parties. However, potential defections could jeopardise her position. To secure her mandate, von der Leyen may seek support from the Greens or the ECR, which involves balancing delicate political alliances. 

 

Italian Prime Minister Giorgia Meloni seeks to position herself as a kingmaker for von der Leyen’s reappointment, aiming for a significant portfolio in the next European Commission. In an interview with a local newspaper last week, vice Prime Minister Antonio Tajani expressed Italy’s desire for a vice-presidential position. However, recent developments suggest von der Leyen is more likely to seek support from the Greens, who hold 52 seats rather than the right-wing ECR. Aligning with the Greens could strain relations within von der Leyen's EPP, especially among members critical of the Green Deal. Striking a deal with the Greens, Socialists, and Renew would make support from Meloni’s MEPs unnecessary, countering previous speculation about an EPP-Meloni alliance. 

 

The parliament’s plenary session on 16-18 July aims to vote on a second von der Leyen term, but due to these complicating factors, her re-election could also be confirmed in autumn. 

 

W/C Monday, 17 June – China’s Vice Premier Ding Xuexiang to visit Brussels following EU’s announcement of tariffs on Chinese EVs 

This week, trade tensions between the EU and China will take centre stage during a series of high-level meetings, as the European Commission prepares to impose extra tariffs on imported Chinese electric vehicles (EVs) next month. 

 

Last Wednesday, the Commission informed affected parties it is proceeding with imposing additional tariffs of up to 38.1% on imported Chinese electric vehicles (EVs). Per previous reports, on 4 October 2023, the Commission published a notice of initiation of EU anti-subsidy investigations into EU imports of battery electric vehicles (BEVs) from China.  This is understood to have been driven mostly by Emmanual Macron. Brussels argues that Chinese EV manufacturers benefit from subsidies that give them an unfair advantage over European competitors. 

 

More specifically, the announced tariffs will vary by manufacturer, with BYD facing a 17.4% mark-up, Geely 20%, and SAIC the highest at 38.1%. These rates are based on inter alia the level of cooperation with the EU's investigation. Companies that did not cooperate face the maximum duty of 38.1% while those that provided some information will be charged 21%. Beijing has threatened retaliation in sectors such as aviation, farmers and spirits and is attempting to rally EU member states against the new tariffs, which would be in addition to the current 10% duties. China already imposes a 15% tariff on European EVs.  Last week, Germany launched a last-minute attempt to prevent a full-scale trade war but Berlin’s intense lobbying efforts did not prove enough to shift the Commission’s stance. 

 

China reacted swiftly, with the Chinese Chamber of Commerce to the EU expressing "shock, grave disappointment, and deep dissatisfaction" at what it called a "protectionist measure" by the Commission, denouncing the investigation as a "witch hunt". On Friday, it was announced that Ding Xuexiang, first Vice Premier, will visit Brussels this week to co-chair the fifth EU-China High-Level Environment and Climate Dialogue, expected to address the Commission’s decision to hit Chinese EVs with tariffs. Notably, this will be the most senior visit by a Chinese official to the EU capital since 2019. Furthermore, German Economy Minister Robert Habeck is set to visit China this week for further discussions, aiming to mitigate Beijing’s potential retaliatory strike, especially in sensitive sectors like agriculture and aviation. 

 

Many EU carmakers fear potential Chinese retaliation or market access restrictions. Besides Germany, Sweden and Hungary have also opposed the move but they need the support of 55% of the member states (currently 15 out of 27) representing at least 65% of the total EU population. The provisional duties will apply from 4 July, immediately affecting Chinese EV imports. However, member states will vote on the tariffs before 2 November, with definitive duties usually imposed for five years. 

 

W/C Monday, 17 June – European Commission likely to announce whether to allow Cooper CH’s $2.2 billion acquisition of the over-the-counter business of US rival Viatris 

This week, the European Commission is likely to announce its decision on whether to allow Cooper Consumer Health’s $2.2 billion acquisition of the over-the-counter business of its US rival Viatris.  

 

This acquisition, announced in October last year, will double Cooper's size and includes nearly 200 brands across 50 countries, marking a significant transformation for the consumer healthcare industry.  

 

To complete the acquisition, Cooper needs approval from the European Commission under both foreign subsidy and merger rules. Cooper filed for EU merger approval in May, with an initial decision deadline set for 12 June. However, after Cooper CH submitted concessions to address regulatory concerns last week, the deadline was extended to 26 June. Although the Commission’s updated deadline for Phase 1 of the deal is on 26 June, a decision is likely in the coming days. This case highlights that EU companies will also find themselves under increased scrutiny when it comes to completing large acquisitions. 

 

Thursday, 20 June – Bank of England committee to decide on interest rates; expected to keep them at 5.25% for seventh consecutive time 

The Monetary Policy Committee (MPC) of the Bank of England (BoE) will meet on Thursday, with a sixth consecutive pause in rates priced in. On 9 May, BoE decided to leave interest rates unchanged for the sixth time in a row, following 14 consecutive increases from December 2021 to August 2023. The key interest rate was kept at 5.25%, which is the highest level since the 2008 financial crisis.  

 

This week’s MPC will take place a day after the release of May’s inflation data. Last month, ONS data revealed that inflation in April fell to 2.3%, marking a decrease from 3.2% in March and the first time inflation has been below 3% since July 2021. The significant drop in the headline rate was expected due to the decline in energy prices, although economists had anticipated a steeper drop to 2.1%. Instead, the focus remains on services inflation and core inflation. The former only slightly decreased to 5.9% from 6%, missing forecasts of 5.5% whereas core inflation, excluding energy, food, alcohol, and tobacco, also dipped to 3.9% from 4.2%. 

 

Economists surveyed by Bloomberg expect UK inflation to fall to the BOE’s 2% target in May, marking a significant milestone after battling double-digit inflation just over a year ago. However, this is unlikely to immediately relieve high interest rates, with the BOE expected to keep its benchmark rate at 5.25% during its next meeting due to concerns over high services inflation.  

 

The BOE stance is unlikely to do Sunak’s Conservative Party any favours in the 4 July general election, where the Labour opposition is comfortably leading in polls. Per the latest surveys, 44.5% of U.K. voters say they will vote Labour, while the Conservatives are at 22.4%. BOE Governor Andrew Bailey has emphasised the bank’s political independence in deciding rate cut timing. 

 

Financial markets are now pricing in a first BoE rate cut in August, with the likelihood of a second  cut by the end of the year seen as slightly better than even odds. This is a significant shift from earlier expectations, which had initially forecast six interest rate cuts in 2024.  Investors will closely monitor Thursday’s MPC for any changes to the BOE’s messaging that could indicate the timing of its monetary loosening.  

 

Friday, 21 June – EU finance ministers to meet, aiming to break the impasse on proposal to tax digital platforms 

On Friday, EU finance ministers will meet in Brussels aiming to break the impasse on a proposal to enhance VAT collection from digital platforms like Uber and Airbnb.  

 

Unveiled in December 2022, the European Commission’s proposal aims to hold these platforms responsible for VAT collection when service providers fail to comply. According to the Commission’s own 2022 VAT Gap report, member states lost €93 billion in VAT revenues in 2020, with conservative estimates suggesting that one quarter of the missing revenues can be directly attributed to VAT fraud linked to intra-EU trade. Additionally, current VAT arrangements can be burdensome for businesses, especially for SMEs, scale-ups, and companies operating cross-border. 

 

In their previous such meeting in May, the EU finance ministers failed to reach an agreement after Estonia vetoed the proposal, arguing it would burden consumers with higher costs and unfairly impact Small and Medium Enterprises (SMEs) using these platforms. Estonia’s veto was largely seen as an effort to safeguard Bolt, the Tallin-based mobility app. More specifically, the Estonian Finance Minister Mart Vorklaev contended that the additional taxes would raise prices for services booked through platforms compared to traditional channels, by stating that "this is not a tax on platforms, it’s a tax on SMEs that provide their services on a platform." On the contrary, the Belgian Finance Minister Vincent Van Peteghem, seeking a compromise, rejected Estonia's call to make the rules optional, expressing the Belgian presidency’s determination to resolve the issue by the end of June. EU Tax Commissioner Paolo Gentiloni also defended the proposal, asserting that it ensured the ‘’necessary flexibility for SMEs’’, ‘’by allowing national authorities to tailor their approach. 

 

Last week, EU diplomats convened ahead of Friday’s ministerial meeting, rejecting Estonia’s request to make key parts of the bill optional. Although Belgium came up with a compromise proposal exempting small firms on platforms like Airbnb from the sales tax, the Baltic state claims it could create excessive bureaucracy. However, Tallinn appears to be isolated on the issue. With all other member states backing Belgium’s compromise text, Estonia could find itself under increased pressure to lift its veto this week.  

 

0 views0 comments

Recent Posts

See All

Comments


bottom of page