Week Ahead (6 February)
Monday, 6 February – EU ban on Russian oil products takes effect
Today, an EU ban on imports of Russian oil products, including gasoline, diesel, and jet fuels, comes into force.
This measure is part of a broader agreement reached between the EU and its G7 partner last December, including a cap of $60 per barrel on Russian oil sold to non-EU countries. Both of these measures complement a previously imposed ban on imports of seaborne Russian crude oil, aiming to slash Russia’s oil revenue, given its global status as the third-largest producer of oil and the second-biggest crude exporter.
Furthermore, last Friday, the EU ambassadors agreed on a price cap for Russian refined oil products, set at $100 for products that trade above the price of crude oil, and at $45 for products that trade at a discount to crude.
Monday, 6 February - Tuesday, 7 February – Informal meeting of ministers responsible for the single market and industry to discuss the Green Industrial Plan
On 6-7 February, the informal competitiveness council will be held. Ministers responsible for the single market and industry will meet to discuss how the EU can achieve its competitiveness objectives in the long term, by strengthening the single market and its green transition.
The meeting will take place only a few days after the European Commission unveiled its Green Industrial Plan, aiming to ensure that the bloc will be able to keep up in the green tech race with the U.S and China, by offering subsidies and tax breaks for clean-tech investments.
Under the plan, the Commission proposes a Net-Zero Industry Act to identify goals for net-zero industrial capacity and provide a regulatory framework to speed up the permit-granting processes for large-scale projects. It will be complemented by the Critical Raw Materials Act to ensure sufficient access to materials that are vital for key green technologies and the reform of the electricity market design.
Nevertheless, a more divisive issue among member states is the plan’s financing mechanism and the new state aid rules foreseen by the European Commission, which is largely expected to be the focus of the upcoming special European Council which will take place later this week.
Tuesday, 7 February – French and German economy ministers visit Washington to discuss the U.S Inflation Reduction Act
France’s Bruno Le Maire and Germany’s Robert Habeck will meet tomorrow with senior White House officials, including Treasury Secretary Janet Yellen, Trade Representative Katherine Tai, and Commerce Secretary Gina Raimondo.
These meetings are part of their joint visit to Washington, aiming to raise concerns over the U.S Inflation Reduction Act (IRA), a protectionist €360 billion scheme including a mix of tax credits and subsidies. Although Washington suggests that these subsidies are essential to kickstart its green economy, in Brussels, they are largely viewed as discriminatory, unfairly protectionist, and a threat to European industry. European industry leaders have warned that the bloc faces the risk of de-industrialisation due to the American green subsidy scheme in unison with the soaring energy prices unless significant interventions are made by EU governments.
The two ministers are once again expected to press for exemptions from the U.S IRA, in order to prevent EU companies from uprooting their production. In December, the EU managed to secure a concession on electric vehicles, after the U.S Treasury Department granted exemptions for electric vehicles built outside North America, making them eligible for tax credits if leased by consumers. It seems improbable that the EU will secure new concessions, as the EU prepares its own response to the U.S IRA, following the introduction of the Commission’s Green Industrial Plan last week.
Thursday 9 - Friday 10 February – Special European Council to be held, the Green Industrial Plan expected to be further discussed
On 9-10 February, the special European Council will be held. EU leaders are also expected to discuss the Green Industrial Plan, following its presentation by the European Commission and the informal competitiveness Council which will take place earlier this week.
To finance its ambitious goals, the Commission’s plan foresees the further loosening of state aid rules until the end of 2025 alongside the use of existing EU funds, given that most member states cannot offer subsidies to the same extent as France or Germany. This means that €225 billion in loans and €20 billion in grants are still available from the EU’s €800 billion post-pandemic recovery fund. For the mid-term, the Commission will propose the establishment of the European Sovereignty Fund to invest in emerging technologies, which is expected to be unveiled by the European Commission next summer, alongside the midterm review of the multi-annual financial framework.
However, several smaller member states, have raised concerns about the implications of the revised state aid rules for the internal market, with financial financially stronger member states that can afford to inject a powerful stimulus into their industries. Instead, they favor a new European fund that would ensure a level playing field, instead of redirecting existing funds. redirecting existing funds.
Friday, 10 February – UK Office of National Statistics to release GDP monthly estimate for December
On Friday, the Office of National Statistics (ONS) will release its GDP monthly estimate for December.
Last month’s release for November demonstrated growth of 0.1%, beating the forecasts which expected a contraction, largely due to a resurge in consumer spending following the government’s reversal of tax rise on payrolls This means that a recession in Q4 2022 is most likely to be avoided unless the GDP figure in December drops by about 0.5%.
Nevertheless, the economy is expected to shrink in the first half of 2023, according to both forecasts of the Bank of England (BoE) and the Office for Budget Responsibility. Despite growing fears of a recession, the BoE announced yesterday its tenth consecutive rate hike, by raising interest rates by 50 basis points to 4% in an attempt to curb inflation which is still nearly five times higher than the bank’s declared target rate of 2%.