Week Ahead (18 July)
Monday, 18 July – EU’s Foreign Affairs Council to discuss seventh Russian sanctions package
Today, the EU’s Foreign Affairs Council is expected to discuss the bloc’s seventh round of sanctions against Russia. On Friday, the EU Commission unveiled the seventh package, confirming the inclusion of a ban on imports of Russian gold, the country’s largest non-energy export, which was agreed at the G7 summit last month. The draft does not list gold in the form of jewelry. The draft package also targets more individuals and entities and includes an expansion of the list of dual-use goods prohibited for export to Russia. Finally, it proposes the extension of the current EU sanctions for six months, until the next review at the end of January 2023.
The previous package, adopted in June, included a ban on 90% of oil imports from Russia and the removal of Russia’s largest bank, Sberbank, from the SWIFT payments system. Despite Ukrainian officials pushing for the inclusion of natural gas, the Czech Prime Minister recently overruled this scenario, as most member states are currently struggling due to their high levels of exposure to imports of Russian gas.
Tuesday, 19 July – EU - China economic and trade dialogue to take place
An EU-China economic and trade dialogue is set to take place on Tuesday, with the participation of high-level trade officials, including the EU commissioner for trade, Valdis Dombrovskis, the EU commissioner for finance Mairead McGuinness, and China’s Vice Premier Liu He.
The dialogue is expected to cover inter alia food security and energy prices, financial services and concerns related to the security of supply chains, bilateral trade, and investments. The talks are set to take place amid an increasingly uncertain global economic outlook, as the war in Ukraine threatens a prolonged effect on the global economy. Since March 2021, the world’s second and third largest economies have been at odds, following the European Parliament’s vote to halt the ratification of the ‘’Comprehensive Agreement on Investments’’ over human rights concerns. The war in Ukraine has further strained bilateral relations between Beijing and Brussels. China has refused to condemn Russia’s invasion of Ukraine, while deepening its bilateral economic ties with Moscow.
Wednesday, 20 July - Mario Draghi to face confidence vote in Italian Parliament after offering resignation
The Italian Prime Minister, Mario Draghi, will face a confidence vote in the Italian Parliament this Wednesday after disagreements with coalition partners the Five Star Movement (M5S) prompted him to offer his resignation. M5S had refused to back Draghi on a bill to support Italian citizens through the cost of living crisis; its leader, former Prime Minister Giuseppe Conte, claimed that the €26 billion package proposed was not enough.
Should Draghi be unable to secure the support of a working majority of Italian MPs, President Mattarella may have no choice but to dissolve the government and call for new elections, possibly in September. While it appears that Draghi has enough support to continue as Prime Minister, should the country be forced to the polls right-wing parties are likely to take power, with Fratelli D'Italia, led by Georgia Meloni, leading by a small margin in the most recent polls, at 22.9% compared to 22.3% for the Democratic Party. Should Meloni’s party take power there will be important implications for Europe; Fratelli D'Italia is a Eurosceptic party which has pledged to "rediscuss" the Eurozone and some European treaties.
Wednesday, 20 July - Top two candidates for leadership of UK Conservative Party to be revealed
The Conservative Party will continue its process of electing a new leader and Prime Minister this week, with the top two candidates to be decided upon by Wednesday ahead of a final vote on 5 September.
The field has now been whittled down to five candidates following several rounds of voting among Conservative members of parliament. Rishi Sunak, the former Chancellor of the Exchequer, has secured the most support to date, with 101 votes. Penny Mordaunt, the former Trade Secretary, is second on 83, with Foreign Secretary Liz Truss third on 64. Kemi Badenoch is fourth on 49 votes, while Tom Tugendhat is on 32.
While Sunak leads, there is no guarantee that he will make the final two, with strong briefings in favour of Mordaunt and Truss having been reported. Indeed, the level of support from MPs for the candidates is not mirrored in opinion polling of the wider membership of the Tory party in recent polling, who will have the final say in deciding the new leader. In a Conservative Home poll carried out on Tuesday Penny Mordaunt is in the lead, on 19.6%, with Kemi Badenoch coming a close second on 18.7%. Rishi Sunak, the favoured candidate of most Conservative MPs, is in third on 10%.
Thursday, 21 July - ECB Governing Council to meet, expected to start hiking rates
The ECB Governing Council will meet this Thursday in order to confirm a planned rate hike, the first since 2011. Last month the ECB announced that its governing council intended to raise interest rates by 25 basis points, even though several high-profile economists have called for a bigger half-point hike. The council will take place only a week after the Euro fell to parity with the US dollar for the first time in 20 years, having depreciated by 12% since January. In June, the U.S Federal Reserve, which has already raised interest rates several times, hiked rates by 75 basis points, moving at a faster tightening pace compared to a more reluctant ECB.
Fighting inflation and stabilising bond yields between peripheral and core countries are currently the key priorities of the ECB. The ECB is currently ironing out details of an upcoming unlimited bond-buying scheme, which will aim to lower borrowing costs for the eurozone’s most indebted states.