Week Ahead (9 December)

Monday 9 and Tuesday 10 December – Single Resolution Board to test banks’ resolution procedures

Today and tomorrow, the EU’s Single Resolution Board (SRB), which is responsible for overseeing the orderly windup of banks in countries participating in the EU banking union, will test resolution procedures in Austria, Belgium and Luxembourg.

The SRB will host the exercise with participants from Austria’s Financial Market Authority, the National Bank of Belgium, Luxembourg’s Commission de Surveillance du Secteur Financier, the European Central Bank and the European Commission. The European Banking Authority and Finland’s Financial Stability Authority will act as observers.

Monday, 9 December - ECB to review Hercules Plan

The ECB will give its assessment today of the Greek ‘Hercules’ NPL reduction plan, approved by the European Commission on 10 October. The plan seeks to reduce the ratio of NPLs currently held by Greek banks, which, at 42.6% at the end of Q2 2019, represent the highest ratio of such loans in the EU.

While NPLs have been declining modestly in the last three years - by around one third, or €30 billion, in nominal terms - the scale of the problem, particularly in the area of business loans, meant that the 'Hercules' plan had to be put in place. Assuming the ECB gives the all clear, the plan will then need to be finalised with legislation through the Greek Parliament, most likely on Thursday 12 or Friday 13 December.

Tuesday, 10 December - German economic sentiment indicators released

The latest ZEW indicator of economic sentiment will be released on Tuesday. The results should be interesting on the back of last month's announcement that Germany had barely avoided going into a technical recession by posting growth rates of just 0.1% in quarter three of 2019. The indicator may also reflect the reaction of markets to the events of the past week, where, in a surprising turn, the SPD, a coalition partner of Angela Merkel's Christian Democrats, elected two obscure left wing candidates, Norbert Walter-Borjans and Saskia Esken, as its new leaders. Their election created immediate fears that the party would pull the plug on the coalition in early course, given that Walter-Borjans and Esken have been critical of the SPD's alliance with Merkel's party in the past.

Wednesday, 11 December - Election of new Swiss President

The Swiss Parliament meets on Wednesday, 11th December, to elect a new President in the aftermath of October's Federal elections. As we reported in October, green issues dominated the election campaign, resulting in both the Swiss Greens and the Green-Liberal parties increasing their share of the vote.

The Greens are more positively disposed to the European Union than the SVP and the Christian Democrats and this is thought to have increased the likelihood of a deal between Switzerland and the EU in the coming month. While talks to formalise relations, which are currently covered by around 120 bilateral agreements, have been ongoing since 2014, no breakthrough has been reached to date.

Thursday, 12 December - UK General Election to take place

The UK's general election will be held this Thursday, 12 May. The election was called after the failures of both former PM, Theresa May, and the current Prime Minister, Boris Johnson, to garner parliamentary support for either the deal struck between the EU and the UK on the terms of the UK's exit, or for exiting the EU without a deal. Brexit, and how/if it will happen, is the main issue at stake. Johnson's Conservative Party are campaigning under the slogan of "Get Brexit done", promising to leave the EU on 31 January under the terms of the EU deal presented to parliament in October should it win a majority, while Labour is advocating reopening negotiations with Europe in advance of a referendum on an improved new deal.

If, as the polls suggest, the Conservatives are elected with a majority, we can expect the UK to leave the EU on 31 January on the terms of the agreement reached in October, a tax cutting budget, a review of sentencing guidelines, a beefing up of border security, and increases in spending on education, before the end of March 2020