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Week Ahead (27 January)

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W/C Monday, 27 January – European Commission likely to unveil 16th package of sanctions against Russia

This week, the European Commission is likely to unveil its 16th sanctions package against Russia, with proposals likely to be circulated to EU ambassadors as early as Tuesday. The new measures could target Russia’s aluminium sector, its so-called "shadow fleet" of oil tankers used to circumvent sanctions, and imports of liquefied natural gas (LNG). Interestingly, this would come as the bloc imported record volumes of LNG from Moscow in 2024.

 

The EU has already imposed 15 rounds of sanctions on Moscow since the invasion of Ukraine. Last month, the European Council approved the 15th sanctions package, which included significant measures targeting Russia’s shadow fleet and companies assisting Moscow in bypassing existing restrictions.

 

Meanwhile, EU foreign ministers meet later today to decide on extending existing sanctions, which must be renewed unanimously every six months. Last week, Hungary’s Prime Minister Viktor Orban hinted at blocking the renewal, once again criticising the sanctions which “destroyed the competitiveness of the European economy.” Orban’s stance, however, appears weakened after US President Donald Trump threatened Russia with more sanctions on Wednesday and directly blamed Vladimir Putin for the war in Ukraine.

 

Tuesday, 28 January – CJEU to hear Google’s appeal against the record €4.3 billion fine for tying other services to Android

Tomorrow, the European Court of Justice (CJEU), the EU’s highest court, is set to hear Google's legal challenge over its biggest penalty to date. In March 2023, the US company filed an appeal against a judgment issued by the EU General Court in September 2022 deciding to largely uphold a record fine of €4.3 billion imposed on Google by the European Commission in July 2018.

 

The fine was imposed over Google’s alleged efforts to dominate the mobile phone market by imposing illegal restrictions on Android device manufacturers and mobile network operators, with antitrust officials concluding that these restrictions hampered competition and harmed consumers. In particular, the case focused on three types of contracts that Google signed with manufacturers and operators, which, according to the EU’s antitrust officials, helped the company expand its presence to an extent that eliminated competition.

 

The Court largely confirmed the Commission’s conclusion that ‘’Google imposed unlawful restrictions on manufacturers of Android mobile devices and mobile network operators in order to consolidate the dominant position of its search engine’’. However, the Court argued that the fine should be trimmed by nearly 5% to €4.125 billion, because of a disagreement in the reasoning of one point.  In its appeal to the CJEU, Google claimed that the EU General Court did not adequately establish that the company was guilty of excluding its rivals.  The timing of the appeal is interesting give President Trump expressing the view last week that he considered the fines against US tech companies as a form of taxation. 

 

Wednesday, 29 January – European Commission to unveil its Competitiveness Compass

On Wednesday, the European Commission will finally unveil its Competitiveness Compass, following two weeks of delay. The blueprint is set to become the EU's roadmap for boosting economic growth, improving innovation, and streamlining regulation over the next five years, drawing from last year’s reports from Mario Draghi and Enrico Letta on how to boost the EU’s economy.

 

In her Davos speech last week, President von der Leyen provided a glimpse by outlining three pillars for the Competitiveness Compass:

 

·       A unified Capital Markets Union (CMU) since Europe’s fragmented capital markets prevent companies from accessing the financing they need to scale and innovate. Von der Leyen noted that while European households save €1.4 trillion annually, significant amounts of these savings, €300 billion each year, flow overseas instead of being reinvested in Europe. To address this, the Competitiveness Compass will propose a European Savings and Investments Union, including new financial products, and incentives for risk capital.

·       Cutting red tape and streamlining regulations to reduce administrative hurdles at all levels of governance. According to von der Leyen, the Compass will call for a fundamental simplification of regulations, particularly in areas such as sustainable finance and due diligence rules. It also outlines the “28th regime’’ a proposal for a unified framework of rules in areas like corporate law, taxation, and insolvency, allowing innovative companies to operate across the EU under a single regulatory regime.

·       Accelerating the Clean Energy Transition. Von der Leyen stressed that lower and stable energy costs are critical for competitiveness. The strategy will seek to accelerate the rollout of renewables and channel these benefits directly to businesses and consumers. The Competitiveness Compass ties into other upcoming initiatives, including the Clean Industrial Deal, set for release in February.

 

In addition, the draft Competitiveness Compass calls for deeper integration of the Single Market, a “fresh approach” to EU competition policy to encourage scaling up businesses, and closer coordination between EU institutions, member states, and private firms. Overall, it is expected to set the stage for reforms aimed at ensuring that Europe remains an economic and industrial powerhouse. The extent to which it will be implemented could define the bloc’s prospects for economic growth in the next years, following years of sluggish economic growth and a widening gap in competitiveness, advanced technologies and innovation with the US and China. 

 

Wednesday, 29 January – European Commission to rule on €6.7 billion takeover of German energy firm Techem by US asset manager TPG and Singapore's sovereign wealth fund GIC 

The European Commission is set to deliver its decision this week on TPG’s €6.7 billion acquisition of the German energy efficiency firm Techem, assessing whether the deal complies with the EU’s Foreign Subsidies Regulation (FSR).

 

The deal, involving Singapore’s sovereign wealth fund GIC as a minority stakeholder, is among the largest private equity transactions in Europe this year and a key test for the FSR framework. Techem is a major player in the decarbonisation and digitisation of the real estate sector, serving over 13 million dwellings across 18 countries and has drawn significant interest due to its alignment with Europe’s energy transition. TPG Rise Climate, the US private equity firm’s climate-focused investment fund, leads the deal alongside GIC and Canadian pension funds.

 

The takeover, announced in October, will be examined under the EU’s FSR, which came into effect in July 2023. The FSR mandates companies to notify the Commission of acquisitions involving significant EU market presence, defined as €500 million or more in annual turnover, and financial contributions exceeding €50 million from foreign governments over the past three years. The regulation aims to level the playing field by addressing distortions caused by non-EU state subsidies, particularly in mergers, acquisitions, and public procurement processes.

 

The Commission has until 29 January to decide whether to launch an in-depth investigation. If no further probe is initiated, the deal could proceed under the principle of positive administrative silence. However, a deeper investigation could delay or potentially block the transaction. The ruling will set a critical precedent for future deals involving substantial foreign financial backing, particularly as private equity firms increasingly rely on sovereign wealth funds and pension funds for large-scale acquisitions.

 

Thursday, 30 January – ECB Governing Council to meet with another rate cut widely expected despite latest inflation uptick

On Thursday, the European Central Bank’s Governing Council (GC) will hold its first monetary policy meeting for 2025 with another rate cut widely priced in.

 

After dipping below the ECB’s 2% target in September (1.8%), inflation has shown signs of rebounding, with December marking the third consecutive uptick to 2.4%, following November’s rise to 2.2%, with core inflation holding at 2.7% for a fourth month in a row. This upward trend is attributed to energy prices and resilient wage growth. However, the eurozone economy remains fragile, with growth for 2024 forecasted at just 0.7%, compounded by geopolitical uncertainties, US tariff concerns, and the political uncertainty in France and Germany, the bloc’s two largest economies.

 

Nevertheless, ECB policy makers have recently expressed growing confidence in the inflation outlook. Last week, Finnish central bank chief Olli Rehn stated, “We are now confident that inflation will stabilise at the target as predicted, and monetary policy will stop being restrictive in the near future.” He also noted that markets expect the ECB’s deposit rate to ease from 3% to 2% by year-end but stopped short of endorsing this trajectory, stressing that decisions will be made "meeting by meeting." Following a series of rate cuts in 2024 that brought the ECB’s deposit rate to 3%, investors anticipate four more reductions this year, potentially lowering rates to 2% by September.

 

At the World Economic Forum in Davos, several Governing Council members echoed this sentiment. French central bank chief François Villeroy de Galhau described the current deposit rate as restrictive, adding, “To expect our policy rate to be around 2% by this summer is a plausible scenario.” Notably, the Dutch central bank head Klaas Knot, known as a hawk, also backed rate cuts on 30 January and 6 March, citing “encouraging” economic data. However, ECB President Christine Lagarde has called for caution, stressing the need to ‘’ensure that we don’t move too quickly, given the weak euro and other external pressures’’.

 

Despite US President Donald Trump’s latest accusations and tariffs warnings for Europe, his decision to refrain from imposing blanked trade tariffs on the bloc last week, which had been a major concern for ECB policymakers, has further bolstered market sentiment and expectations for further monetary easings.

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