Week Ahead (23 September)

W/C Monday, 23 September – Temporary relief for Scholz’s SPD after narrowly defeating far-right AfD in Brandenburg state elections 

On Sunday, the eastern German state of Brandenburg held elections. According to the latest vote count, the SPD party of Chancellor Scholz has gained 30.9% of the vote, managing to narrowly fend off the far-right AfD party which follows with 29.2%. In contrast, Scholz’s junior coalition partners performed poorly. The Greens narrowly missed the 5% threshold needed to enter the state parliament, while the liberal FDP managed just 1% of the vote. The newly formed left-wing populist BSW finished third with 13.5%, while the conservative CDU, despite leading national polls, secured only 12.1%. This was the third state election in September. Earlier in the month, all three coalition parties suffered heavy losses in Saxony and Thuringia. In Thuringia, the Greens and FDP failed to meet the 5% threshold, and the SPD managed only 8%, while the AfD emerged as the leading party. In Saxony, the AfD closely followed the CDU with 31% of the vote. 

The Brandenburg result brings temporary relief to Scholz's ruling SPD following these electoral setbacks in the state and EU elections. However, it also confirms a broader trend of the AfD gaining ground and competing for the top spot across various states. The AfD’s platform, centred on halting immigration, opposing windfarm construction, and ending military support for Ukraine, has gained support amid growing national concerns over inflation, the Ukraine war, and rising migrant numbers. The BSW’s strong performance could position it as a potential coalition partner in future talks. This has already been seen in Thuringia, where the CDU has been negotiating with both the BSW and the SPD to prevent the AfD from gaining power. Given its blend of right-wing views on immigration and left-wing economic policies, the BSW is viewed as a more acceptable partner than the AfD. 

Although Scholz's narrow win in Brandenburg may temporarily quiet dissent within the SPD, questions remain about his ability to lead the party to broader success in next year's national elections. Polls have shown him to be the least popular chancellor since reunification, and a survey last week revealed that only 3% of voters support the governing SPD-Green-FDP coalition. The dismal performance of Scholz’s coalition partners, especially the Greens and FDP, reflects the broader national discontent with the government's handling of key issues, particularly inflation and immigration. These challenges weigh heavily on the SPD's prospects heading into the 2025 elections. As tensions grow within the coalition, the SPD may resist further concessions to the fiscally conservative FDP, particularly on sensitive areas like the budget, to consolidate its support base ahead of the national vote. 

W/C Monday, 23 September – New French governmental cabinet confirms shift to the right; economic growth and public debt reduction among key priorities 

The newly-appointed French Prime Minister Michel Barnier presented his new Cabinet on Saturday, marking the most right-wing government in over a decade. Barnier will assume direct control over critical areas such as European affairs and the budget, reflecting concerns about France’s rising budget deficit and his expertise as a former Brexit negotiator. His role will include navigating ongoing negotiations with the European Commission regarding France’s breach of EU spending rules. 

Barnier's Cabinet includes a mix of centrist and right-wing figures, with some junior ministers reporting directly to him on key policy issues. Bruno Retailleau, a conservative known for his hard stance on immigration, was appointed as Interior Minister. Meanwhile, Macron loyalists retained influential positions, such as Jean-Noel Barrot taking charge of Foreign Affairs and Sebastien Lecornu remaining at Defence. In finance, two lesser-known deputies from Macron’s party, Antoine Armand and Laurent Saint-Martin, were appointed to manage economic and budgetary matters, tasked with addressing France’s worsening public deficit, expected to surpass 5.6% of GDP this year.   

Overall, the new government faces tough budget negotiations and growing opposition from both ends of the political spectrum. The far-right RN, led by Marine Le Pen, has indicated that their support for the government is temporary, suggesting they could back a no-confidence motion over budget disagreements. The left-wing NFP and other activists have already protested Barnier’s appointment, criticising Macron for ignoring their electoral gains with the Green party’s leader Marine Tondelier calling the new cabinet ‘’indecent’’ and ‘’shameful’’. Barnier is expected to outline his government’s agenda in his first speech to parliament on 1 October, prioritising economic growth, immigration control, and reducing public debt. 

W/C Monday, 23 September – European Commission likely to issue preliminary findings to Alphabet regarding ongoing DMA probe 

On 25 March, the Commission launched full-scale investigations into Apple, Google, and Meta’s compliance with the DMA, the first ones since the new rules entered into force on 7 March. These investigations began in March and are expected to conclude by the same month next year, scrutinising several practices. Alphabet, Google’s parent company, is under the microscope for possibly favouring its own services in search results and imposing new fees that may contravene the DMA's requirements. 

Although the Commission has set a 12-month deadline for the conclusion of the probes, it has also previously stated that the preliminary findings will conclude within 6 months, to allow companies under investigation to make changes ahead of the final deadline of March 2025. The Commission has already issued such preliminary findings to Apple (24 June) and Meta (1 July), with Alphabet likely to follow suit this week.  

Meanwhile, last Friday the Commission opened two proceedings to ensure Apple's compliance with the DMA's interoperability obligations. The first proceeding focuses on iOS connectivity features and how Apple allows third-party devices (like smartwatches, headphones, and VR headsets) to connect and interact with iOS. The Commission seeks to clarify how Apple must provide interoperability for critical functionalities like notifications, device pairing, and connectivity. The second proceeding examines Apple's process for handling interoperability requests from developers and third parties. The Commission will conclude these proceedings within six months, recommending specific measures for Apple to comply with the DMA. This signals a shift from the Commission’s early approach to the enforcement of the new rules that the big tech firms should hammer out by themselves on how to ensure full compliance.   

The DMA’s purpose is to regulate the digital market by preventing big tech companies, referred to as ‘’gatekeepers’’ from abusing their dominant market positions, and opening competition to smaller competitors. To that end, it introduces new responsibilities for tech companies, including sharing data, linking to competitors, and ensuring interoperability with rival apps. Companies with an annual turnover exceeding €7.5 billion, a market capitalisation of over €75 billion, and active monthly users in the EU totalling 45 million fall under these rules. The European Commission has the power to investigate the actions of gatekeepers and fine them up to 10% of their global turnover from the preceding year if they are found to be in breach of the DMA. 

W/C Monday, 23 September – European Commission likely to rule on Francisco Partners’ and TA Associates’ strategic partnership in French software company 

In July, Francisco Partners and TA Associates, two global private equity firms, headquartered in the US and UK, respectively, entered into an agreement to become co-controlling shareholders of Orisha, a French-based European software company. Orisha, formerly known as DL Software, was founded in 2003 to provide industry-specific ERP software across various sectors in France. The company, headquartered in Paris, now employs over 1,800 people and serves more than 40,000 customers with specialised vertical software solutions. 

Since TA Associates became Orisha's majority shareholder in 2021, the company has quadrupled its revenue and restructured its business into five key vertical units: Retail, Health & Safety, Construction, Real Estate, and Agri-Food. Its expected revenues for 2024 are over €250 million. TA will reinvest in the company alongside Francisco Partners and Orisha’s management, while 21 Invest France, a previous minority investor, remains involved. Per the deal’s announcement, this new investment is aimed at continuing Orisha’s growth trajectory, focusing on organic expansion, geographic diversification, and strategic acquisitions to further consolidate its market leadership. The deal is expected to close in the second half of 2024, pending regulatory approval. Although the European Commission’s DG COMP has a decision deadline of 4 October a decision may come as early as this week. 

Thursday, 26 September – CJEU to rule on a series of legal challenges to Germany’s state aid schemes 

On Thursday, the Court of Justice of the EU (CJEU), the EU’s top court, will rule on a series of legal challenges against Germany’s state aid schemes for baseload consumers.  The appeals sought to overturn rulings by the General Court, which had dismissed actions challenging the Commission’s decision in 2018. 

The cases involved several companies, including Infineon Technologies, WEPA Hygieneprodukte, AZ, and Covestro Deutschland, all of which contested the General Court's decision to reject their requests to annul the Commission’s State aid ruling. 

The cases in question include: 

• Germany v Infineon Technologies Dresden and other related cases (C-794/21 P, C-800/21 P) 

• WEPA Hygieneprodukte v Commission and other cases (C-795/21 P, C-796/21 P) 

• AZ v Commission and related cases (C-792/21 P, C-793/21 P) 

• Covestro Deutschland v Commission (790/21 P, C-791/21 P) 

In her non-binding legal opinions issued last November, Advocate General (GA) Lalia Medina proposed that the CJEU uphold the General Court's judgments, essentially supporting the Commission’s original approval of the German aid scheme. Although the opinion is non-binding, the CJEU’s final judgement this week is likely to resemble the advocate general’s opinion. Notably, the rulings will come against the backdrop of Mario Draghi’s recently-published report on the future of European competitiveness where he argued inter alia that the EU needs to revamp its state aid rules to allow for more flexibility in supporting industrial strategies.