Week Ahead (4 March)

W/C Monday, 4 March – Last week of campaigning ahead of Portuguese general elections 

The final week of campaigning ahead of the Portuguese general elections commences today. Portugal will hold a snap election on 10 March after the Socialist government led by Antonio Costa collapsed in November, following his implication in a corruption probe.   

As things stand, the centre-right Social Democratic Party (PSD), the current leading opposition force, is poised to finish first, currently polling at 31%.  Despite its support dropping more than 10% since the last elections were held in 2022, the ruling Socialist Party (PS) is currently polling just behind the PSD at 29%. Current polls also suggest the far-right Chega (‘’Enough’’) party is continuing its upward trend, polling at 17% and is projected to become the third largest party in the county under the leadership of a former television sports commentator, Andre Ventura.  Ventura's populist anti-establishment message, often criticised for xenophobia, resonates with voters disillusioned with corruption, rising housing costs, low wages, and struggling public services which are dominating the agenda ahead of the elections.  

In spite of its lead in polls, PSD is still struggling to overcome associations with past austerity policies. It is unlikely to be able to form a government on its own. Potential coalition scenarios include a PSD-led alliance with smaller conservative parties like CDS-PP and IL. On the left, the PS may form alliances with the Communist party or the Left Bloc. However, neither side currently has a clear path to a majority, raising the possibility of political instability or a shift in party positions to secure power. 

PSD’s leader, Luis Montenegro, has stated that he would never join forces with Chega, however, forming a coalition with the far-right may be his party’s most likely path to power. Chega is affiliated with the eurosceptic far-right Identity and Democracy (ID) group in the European Parliament. Its emergence as the third biggest party in the country reflects a broader trend across the EU, with the ID group currently projected to overtake the centrist forces as the European Parliament’s third largest political group in the European elections of June. Ventura has received the support of other prominent far-right figures in Europe, including Italian deputy prime minister Matteo Salvini and Geert Wilders, who is currently in talks to form a government in the Netherlands. 

W/C Monday, 4 March – European Commission likely to announce decision on Cisco’s acquisition of Splunk 

This week, the European Commission is likely to announce its decision on whether to allow Cisco’s acquisition of Splunk, a US-based cybersecurity firm.  

In September, Cisco, a US multinational digital communications technology firm, announced the $28 billion acquisition of Splunk, which was the largest technology deal in 2023. According to the announcement, the deal aims to diversify Cisco's business away from its networking equipment sector, which has encountered challenges such as supply chain disruptions and reduced demand post-pandemic. Subsequently, the two parties filed a notice of the proposed deal to the Commission last month.   

Tech mergers have drawn particular scrutiny from antitrust regulators due to fears of larger companies consolidating market power at the expense of smaller competitors, in what has been described as ‘’killer acquisitions’’. In the past six months, three such technology deals faced challenges in Brussels, namely Booking’s purchase of eTraveli, Adobe’s acquisition of Figma, and Amazon’s acquisition of iRobot, all eventually falling through.  

Nevertheless, latest reports suggest that Cisco’s deal is set to receive an early EU approval this week. As of now, the Commission has not summoned the companies for a "state of play" meeting which usually takes place towards the end of the preliminary investigation, indicating that Cisco is on track to secure regulatory approval for the acquisition. 

W/C Monday, 4 March – European Commission likely to announce decision on Bain Capital’s acquisition of controlling stake in Swedish infrastructure firm 

This week, the European Commission is also likely to announce its decision on whether to allow Bain Capital’s acquisition of a controlling stake in Swedish infrastructure firm Eleda from private equity firm Altor. Bain Capital, a US private equity firm Bain Capital announced the deal in September, amounting to approximately €1 billion in cash and shares. The deal, which values Eleda at approximately €1.5 billion including debt, involves Altor retaining a minority stake in the company. Eleda's founders, Johan Halvardsson and Peter Condrup, along with its management team, are expected to reinvest significantly in the company. 

Eleda, headquartered in Stockholm, focuses on various infrastructure projects such as water and sewerage systems, power distribution, district heating, roads, data centers, railways, and electric vehicle charging stations. A significant portion of its business is dedicated to projects associated with the transition to green energy. The company generates over 15 billion Swedish kronor ($1.4 billion) in revenue. Altor established Eleda in April 2020 through the merger of three infrastructure services platforms, resulting in approximately SEK 6 billion in turnover at the time of the merger. DG COMP may clear the deal after the completion of the preliminary review or initiate a four-month investigation if serious concerns about competition distortion arise. 

Thursday, 7 March – ECB to hold monetary policy meeting, expected to keep rates unchanged for a fourth time 

On Thursday, the ECB Governing Council (GC) meets to decide the next steps for Eurozone interest rates with another pause in rates priced in. In January, the ECB decided to keep its rates unchanged for a third consecutive time, at a record high of 4%, amid a worsening economic outlook. On Friday, Eurostat’s flash estimate for the euro area indicated that inflation in February dropped from 2.8% to 2.6%, continuing its overall downward trend and moving closer to the ECB’s 2% target. 

However, it dropped less than the original projection of 2.5% made by economists polled by Reuters, indicating persistent price pressures and denting hopes of an imminent ECB rate cut. Excluding volatile elements like food, alcohol, tobacco, and energy, inflation slowed to 3.1% from January's 3.3%, still above the consensus forecast of 2.9%. In Germany, core inflation remained steady at 3.4%, attributed to robust growth in services prices, whereas in France, services inflation slowed to 3.1% from 3.2%. The minutes of its January meeting also confirmed that the GC is still wary of inflation, due to a series of factors, including elevated wage growth, scrutiny on corporate profits, and disruptions in the Red Sea shipping, threatening supply chains. 

Although most members of the GC support cutting rates this year, there is growing divergence on when to initiate the process. The latest inflation data could bolster the more hawkish elements of the GC, including Austrian Central Bank Governor Robert Holzmann who recently overruled a discussion on rate cuts before June. Last week, ECB President Christine Lagarde told the European Parliament that price growth is projected to continue slowing down, with past upward shocks diminishing and tight financing conditions contributing to lower inflation. Nonetheless, Lagarde also highlighted that strong wage growth would be “an increasingly important driver of inflation dynamics in the coming quarters, reflecting employee demand for inflation compensation and tight labour markets”. 

While the ECB is not expected to make any policy changes at its next meeting on 7 March, changes in official communication are expected to provide more precise indications of a possible rate cut later in the year. Thus, the GC is likely to acknowledge the improved inflation outlook, potentially paving the way for rate cuts around mid-year. 

Thursday, 7 March – Digital Markets Act comes into effect 

On Thursday, the Digital Markets Act (DMA) will come into effect. The DMA, together with the Digital Services Act (DSA), is part of the landmark Digital Services Package. The purpose of the Act 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 will fall under these rules. The European Commission would have 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. 

Last September, the European Commission confirmed the final list of six tech companies qualifying as ‘’gatekeepers’’ under the Digital Markets Act (DMA), namely Apple, Alphabet (Google), Amazon, Meta, ByteDance (TikTok), and Microsoft. Core platform services falling under the scope of the new rules include Apple’s App Store, Google’s Chrome Browser, Microsoft’s LinkedIn, and Meta’s Facebook and Instagram.  Apple and Microsoft contested the designation of some of their services as gatekeepers, successfully securing exemptions for their iMessage and Bing search engine, respectively, last month. ByteDance challenged its designation at the General Court, the EU’s lower court, claiming that TikTok’s inclusion to the list could undermine the ‘’DMA's own stated goal by protecting actual gatekeepers from newer competitors like TikTok’’ and applied for interim measures. However, last month the Court ruled against the suspension of TikTok’s designation, arguing that it could not prove that it needed it urgently to prevent “serious and irreparable damage”. 

The online travel platform Booking also filed a notification as a gatekeeper under the DMA on Friday, alongside ByteDance and X, becoming the latest entry in the list of gatekeepers and the first European platform to be regulated by the new rules.  In previous weeks, Apple, Google, and Meta announced a series of changes to ensure compliance with the DMA ahead of this week’s deadline.