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Week Ahead (21 June)

W/C Monday, 21 June - Collapse of Swedish government; PM to decide on negotiations or resignation

Swedish Prime Minister Stefan Löfven lost a vote of no confidence earlier today.  The vote followed the Left Party's withdrawal of its support for the centre-left minority government over a dispute concerning the government's recent decision to remove rent controls for newly built apartments. The no-confidence motion, which required 175 votes in the 349-seat parliament to pass, was supported by 181 lawmakers, including all three right-wing opposition parties.

Löfven now has one week in which to either attempt to form a new government with other parties or resign. Should he choose to resign, other parties may attempt to form a caretaker administration which would govern until the next general election, currently scheduled for September 2022. Snap elections could also be called.

An election could result in prolonged stalemate, with polls showing that neither the traditional centre-left or centre-right blocs would be likely to win a majority.

W/C Monday, 21 June - European Commission to endorse further recovery plans endorses five recovery and resilience plans

Ursula von der Leyen, the President of the European Commission, will this week visit several more member states to rubber-stamp their recovery and resilience plans. She will travel to Austria, Slovakia, Latvia, Germany, Italy, Belgium and France this week in the next stage of the Commission's approval process. Italy has been allocated the largest share of the recovery fund, with the country expected to receive some €191.5 billion from Brussels. Last week the Commission announced that it was endorsing the Spanish, Portuguese, Greek, Danish and Luxembourgish Recovery and Resilience Plans. 

Following the Commission's approval of the recovery and resilience plans, the European Council must now scrutinise them. It has four weeks in which to adopt the Commission’s endorsements, after which member states can receive 13% of their respective allocated funds in pre-financing. 

Thursday, 24 June - Bank of England Monetary Policy Committee to meet amid growing inflation

The Bank of England Monetary Policy Committee will meet on Thursday.  At its May meeting it was decided that interest rates would remain at 0.1%, with policymaker Gertjan Vlieghe stating that the BoE would not raise interest rates until the first half of 2022 at the earliest, with a rise more likely in H2 2022.  However, inflation jumped to 2.1% in May, its highest rate in two years, fuelled by increases in energy, clothes and food costs.  This has stoked discussion of a potential increase in interest rates over a shorter timescale. 

Despite this, a poll carried out last

week suggests that economists expect that inflation may rise to 3% - 3.5% before the BoE takes any action, and that it will fall to close to target levels by the year end.  The sharp spike in inflation is being widely attributed to pressures associated with the re-opening of the economy as businesses struggle to meet demand.

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