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Week Ahead (22 July)

Monday, 22 July – Greek confidence vote


Following the swearing in of all 300 MPs last week, today will see the new government put to a confidence vote in parliament. With 151 votes required, New Democracy’s 158 seats make this a formality. Of the 158 New Democracy MPs, 63 are new.


Tuesday, 23 July – Boris Johnson set to take keys to Downing Street


This week will be another eventful one in UK politics with Boris Johnson set to be announced as the winner of the Conservative party leadership contest tomorrow. If confirmed, Johnson will have to nominate a new cabinet, begin making overtures to EU leaders on Brexit and deal with heightened tensions with Iran. Parliament will enter a six-week summer recess on Thursday ahead of a 1 August by-election where Johnson is likely to see his majority reduced to 3.


Tuesday, 23 July – Sanchez first investiture vote


Ahead of Tuesday’s vote, Sanchez has dedicated considerable energies to cobbling together a coalition of 175 seats, one seat short of a majority, by focusing on securing the support of the 42 seats of Podemos and regional parties that do not favour independence. Podemos’ insistence on a cabinet seat for Pablo Iglesias looked likely to scupper these efforts until Iglesias agreed on Friday evening to stand aside in order to facilitate a ‘progressive government’ which will contain his partner and Podemos deputy leader Irene Montero.


In the highly likely event that the first vote on Tuesday, where an outright majority of 176 seats is required, fails, a second round of voting will take place Thursday, where simply more “yes” than “no” votes are required. If a second vote fails, PSOE have indicated that they will move to elections. However, there is the possibility of a third vote in September. Should this fail, another election will need to take place by 10 November.


Wednesday 24 July – Conte to address parliament on Russiagate scandal


The past weeks have seen tensions ramp up within the Italian governing coalition. Amid the usual M5S/Lega tension, Lega has opened up another front against Prime Minister Conte who contradicted Salvini’s initial explanation of the Moscow meeting.


In a move designed to increase pressure on Salvini, Conte will himself report to the Senate next Wednesday on the Russiagate scandal. Salvini has pledged to address parliament on his own terms but not in the form of a formal report which House Speaker Fico (M5S) has agreed with opposition parties is required.


Thursday, 25 July – Draghi poised to signal rate cut in one of his last meetings


Given the continued weakness in inflation, and the risks posed to the Eurozone economy by the volatile global situation, analyst expectation has now firmly shifted towards a reboot of ECB stimulus measures.


The ability of Draghi to himself see through accommodative measures may be affected by relatively positive economic data. Nevertheless, with headwinds to global growth and trade, we think it likely (70% probability) that Draghi will implement a cut to the deposit rate, either this week or in September. We also think there is a strong possibility of a relaunch of the ECB’s quantitative easing programme (40% probability) in September. Draghi is unlikely to allow the prospect of inaction impinge on his legacy as the most significant figure in overcoming the financial crisis in the Eurozone, if not in the history of the Eurozone in its totality.


Thursday, 25 July – Deadline for Carige administrators to find a solution for the bank


Although the identity of potential rescue participants has changed continuously over the past weeks, the plan to rescue Carige remains broadly similar – FTID will convert to equity a €318 billion bond and will commit an additional €200 million through its mandatory fund. With FTID contributing over €500 million, the remaining €400 million is expected to come from a variety of public and private sources. The amount of capital required has also changed, increasing to €900 million from €780 million because it now involves Carige selling off its entire NPL portfolio to SGA – a bad bank controlled by the Italian Treasury.


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