Week Ahead (8 September)

Monday, 8 September – French Prime Minister Bayrou faces confidence vote on 2026 budget plan; expected to be ousted 

This afternoon, French Prime Minister Francois Bayrou will face a vote of confidence in the National Assembly over his controversial €43.8 billion savings package for the 2026 budget. With opposition parties united against him and coalition support fragmenting, Bayrou is widely expected to lose, ending his premiership less than nine months after President Macron appointed him. 

The budget plan, unveiled in July, includes a series of unpopular measures such as a freeze on most public spending, €5 billion in cuts to health expenditures, and the elimination of two public holidays – a measure opposed by 84% of voters, according to a recent Odoxa poll. Bayrou has defended the package as essential to bring France’s deficit, which reached 5.8% of GDP in 2024, back under control. Public debt now stands at 113% of GDP, one of the highest in the eurozone. 

Opposition parties from Marine Le Pen’s Rassemblement National (RN) to the Socialists and La France Insoumise (LFI) have committed to voting against Bayrou and barring a last minute miracle his tenure as Prime Minister is all but over.   

The vote will open another chapter of political uncertainty in France. Macron faces three options once Bayrou falls: appoint yet another centrist prime minister in the hope of finding a fragile working majority; dissolve parliament and call early elections, risking an even stronger showing by the far-right; or resign, a scenario he has so far categorically ruled out. 

The fiscal backdrop is increasingly precarious: in June, Budget Minister Amelie de Montchalin warned that France risked its finances falling under IMF or EU supervision if deficit consolidation is delayed, echoing the eurozone debt crisis experience of the previous decade. However, on Monday, ECB President Christine Lagarde dismissed the prospect, stressing that while the situation is “worrying”, French institutions remain strong and capable of managing adjustment. 

The timing of the motion is particularly delicate. Trade unions are preparing a national blockade on 10 September and a mass mobilisation across transport, education and the civil service on 18 September. Latest reports in France suggest that Macron is expected to move swiftly to name a successor before the latter strike, to avoid becoming the direct political target of street protests. 

From a business and investment viewpoint, the immediate risk is political paralysis. Although France’s economy grew 0.3% in Q2 and August’s PMI showed manufacturing expansion for the first time in over two years, uncertainty around fiscal consolidation and policy direction is already dampening confidence. The employers’ federation Medef has already warned of a “freeze in investments” and increased risk of bankruptcies. Longer term, Oxford Economics has forecasted that no meaningful deficit reduction should be expected until after the 2027 presidential election, with public debt likely to climb beyond 120% of GDP. 

W/C Monday, 8 September – European Commission likely to unveil 19th sanctions package against Russia 

This week, the European Commission is expected to put forward its 19th sanctions package against Russia, as Moscow intensifies attacks on Ukraine despite President Putin’s meeting with President Trump in Alaska last month. 

The package is likely to focus on closing loopholes and tightening enforcement rather than introducing sweeping new measures. Options under discussion include stricter enforcement of the G7 oil price cap, new measures against circumvention networks that resemble US-style secondary sanctions, and additional financial listings. A ban on re-exports from third countries, designed to prevent goods legally imported elsewhere being redirected to Russia, is also under consideration. 

Washington’s stance could also shape the EU debate on further sanctions. Over the weekend, President Trump signalled greater openness to tougher sanctions, while Treasury Secretary Scott Bessent insisted earlier this month that “all options are on the table” following Russia’s post-Alaska bombardments. Bessent explicitly criticised India’s purchases and re-exports of Russian oil, hinting at possible frictions that could push the US closer to the EU’s line on circumvention if bombardments continue. 

As in previous rounds, opposition from Hungary and Slovakia, both reliant on Russian energy, will remain the main obstacle. Yet direct US engagement has in the past helped overcome such resistance and could once again prove decisive. 

Given the ‘’sanctions fatigue’’ of previous months and the lack of any radical new measures in most recent packages, the re-export ban could mark the most substantive addition to the EU’s sanctions architecture since early 2024. 

Wednesday, 10 September – Von der Leyen to deliver her State of the European Union speech 

On Wednesday, European Commission President Ursula von der Leyen will deliver her annual State of the European Union speech before the European Parliament in Strasbourg. It will be followed by a debate with MEPs. The speech is expected to outline the Commission’s priorities for the year ahead while reflecting on challenges faced during the past 12 months. 

According to the Commission, this year’s theme “From choice to action: how the EU rises to today’s challenges”, will focus on strengthening Europe’s resilience in the face of war in Ukraine, cost-of-living pressures, and intensifying global competition. 

More specifically, trade policy is set to feature prominently. Brussels’ deal with Washington to cap new tariffs at 15% eased immediate concerns of a transatlantic trade war, but renewed US threats to retaliate against EU digital and competition probes targeting US tech firms have kept tensions high. Von der Leyen is likely to stress the EU’s role as a trade and regulatory global actor aiming to ease MEP concerns over potential compromises to its digital and competition rulebook for the sake of transatlantic relations.  

Defence will also be a key theme, given Russia’s ongoing war in Ukraine. Von der Leyen will likely highlight progress on the implementation of the €150 billion Security Action for Europe (SAFE) programme, following loan requests submitted by 19 member states over the summer. 

Another focus will be competitiveness. Last year’s Draghi report warned of Europe’s structural productivity gap with the US and China. Von der Leyen is also likely to link new budget proposals for the 2028–2034 Multiannual Financial Framework (MFF) to investments in skills, housing, and digitalisation, framing them as necessary for Europe’s long-term resilience. 

Wednesday, 10 September – General Court rulings on Meta’s and TikToK’s challenges over DSA supervisory fee 

Also on Wednesday, the EU’s General Court will issue its rulings in two cases brought by Meta (T-55/24) and TikTok (T-58/24) against the European Commission’s decision to levy annual supervisory fees under the Digital Services Act (DSA). The challenges mark the second major legal test of the EU’s landmark content law after Zalando’s failed bid last week to overturn its “very large online platform” (VLOP) designation. 

The DSA, which became law in 2022, introduces new obligations for platforms based on their scale and reach. Particularly stringent requirements apply to “very large online platforms” and “very large online search engines” (VLOPs and VLOEs), defined as services with more than 45 million active monthly users in the EU. To finance its oversight of these companies, the Commission imposes an annual supervisory fee, capped at 0.05% of a company’s worldwide net income, with the 2024 enforcement budget set at €45.2 million. 

Meta and TikTok argue that the fee structure is disproportionate and based on flawed methodology. Meta, which says it was billed €11 million this year, told judges in June that it is not opposed to contributing but criticised the Commission for using group-level revenues rather than subsidiary figures, calling the system “totally untransparent” and “absurd.” TikTok has also denounced the methodology as discriminatory, claiming that user numbers were double-counted and that the Commission unfairly required it to subsidise other platforms. 

In the hearing before the General Court in June, the Commission lawyers defended the fee model as legally sound, necessary to ensure independent enforcement, and consistent with the DSA’s provisions. A ruling in favour of Meta or TikTok this week could force the EU executive to revisit its methodology and potentially revise the cost allocation mechanism across the digital ecosystem. The decisions could also set a precedent for how EU courts scrutinise the Commission’s supervisory powers under the DSA, with broader implications for future disputes involving large platforms. 

Thursday, 11 September – ECB to hold monetary policy meeting, expected to hold rates steady amid tariff truce and inflation uptick 

On Thursday, the European Central Bank’s Governing Council (GC) will hold its monetary policy meeting, widely expected to hold its benchmark interest rate unchanged at 2%, for a second consecutive time. Markets assign just a 5% probability of a cut, reflecting growing consensus that the ECB has entered a cautious holding pattern after eight consecutive reductions since mid-2024. 

The minutes of the July meeting confirmed the Governing Council’s “wait-and-see” stance, with President Christine Lagarde stressing that the ECB is now in a “good place” after largely completing its disinflation task. Since then, the external environment has shifted somewhat in the ECB’s favour. On 27 July, Brussels and Washington reached a trade deal capping new US tariffs on EU exports at 15%, easing fears of a sharper escalation that could have forced the Bank’s hand. Lagarde nonetheless cautioned that uncertainty has been “mitigated but not eliminated.” 

On the data side, the euro area’s inflation picture remains mixed. Headline inflation saw a small uptick to 2.1% in August, after stabilising at the ECB’s 2% target in July, while core inflation stayed sticky at 2.3%. Services inflation remains elevated at 3.3%, reflecting domestic price pressures. At the same time, growth indicators continue to point to resilience: the August flash composite PMI rose to 51.1, marking an eighth straight month of expansion, while Q2 GDP surprised to the upside at 1.5% year-on-year. 

Investors are now looking to the ECB’s updated staff projections, due in mid-September, which will fully incorporate the tariff truce assumptions. Derivatives markets continue to price less than a 40% probability of further easing this year, suggesting that unless downside shocks materialise, the ECB is likely to hold steady through the autumn.