Week Ahead (9 October)

W/C Monday, 9 October – Last week of campaigning ahead of Polish general elections

The final week of campaigning ahead of the Polish general elections commences today. As things stand, the ruling PiS is projected to finish first with 35-37% of the vote, followed by the centre-right Civic Platform, led by former President of the European Council Donald Tusk, which is polling on 30%. However, current polling also suggests that PiS will fall short of winning the 231 seats needed for a majority in the lower-house Sejm.

The far-right Confederation, with its predicted 24 MPs, is now seen as a potential kingmaker. Their popularity has been rising since November, coinciding with a conscious effort to soften their image. Their recent rise in the polls has seen them overtake The Left, competing neck and neck with Poland 2050 to become the third most popular party in Poland. The Confederation, currently polling at 10%, has caused concern for the mainstream opposition, which might have to opt for coalition talks with left parties or the centrist Third Way Coalition in order to sideline PiS.

Civic Platform, Poland’s leading opposition party, is making a significant push to mobilise supporters calling for massive rallies across the country. On 1 October, nearly one million people gathered in Warsaw and other major cities to protest against the current government. On the other hand, PiS, in power since 2015, is a right-wing populist party with strong support in rural areas and smaller towns. Despite facing criticism for undermining democratic norms and media freedoms, PiS has also delivered continuous economic growth while increasing social spending. Furthermore, its polling rate has not been significantly affected by its ongoing standoff with the European Commission over access to €35.4 billion in funds from the EU recovery and resilience facility.

Campaign narratives from both main parties focus on fear-mongering, with PiS highlighting migration concerns and Tusk’s coalition addressing democratic erosion and human rights. A scandal involving alleged corrupt visa sales has affected PiS’s tough immigration stance but remains uncertain whether it will also impact on the core of its voting base.

Tuesday, 10 October – Irish government to unveil its 2024 Budget

On Tuesday, the Irish government will unveil its budget for next year. The country is experiencing a remarkable financial situation due to substantial corporate tax revenue primarily from global tech and pharmaceutical companies. In the first six months of 2023, the budget surplus indicated a 20% increase to the corresponding period in the previous year. However, this financial windfall presents political challenges as public expectations rise with the increasing surplus.

In July, the Irish governmental coalition signed off its Summer Economic Statement, which sets out the parameters for Budget 2024. According to the agreed statement, in October's budget, the Irish government plans to introduce a tax and spending package totaling an extra €6.4 billion, reflecting the massive surplus of tax revenue. This package will encompass approximately €5.2 billion in added public expenditure and around €1.1 billion in tax-related measures. Notably, the budget will allocate an extra €2.25 billion for infrastructure expenditures over the period 2024 to 2026, including schools, hospitals, and transport projects. Social welfare payments and state pensions are also expected to increase in Budget 2024.

Nevertheless, many advisory bodies and economists have called for caution because of the unreliability of corporate tax receipts. Ireland’s latest economic boom is primarily attributed to the concentration of corporate tax revenues from a handful of major companies. A potential vulnerability is highlighted as Ireland plans to raise its corporation tax rate to 15% in January, a move aligned with a global deal. Indicatively, Ireland experienced a substantial decline in its corporate tax receipts of 36% (€1 billion) in August compared to the same month in 2022. Tax receipts also fell by by 12% (€300 million) in September. Furthermore, there is hesitancy to increase spending due to potential inflationary pressures.

Despite these concerns, the current government in Ireland, a coalition comprising the center-right parties Fianna Fáil and Fine Gael along with the Green Party, is reluctant to increase taxes. A general election is anticipated within the next year and a half and given the political landscape and pressure from Sinn Féin, the focus within government is leaning towards spending increases.

Thursday, 12 October – ECB to release minutes of September meeting

On Thursday, the ECB will release the minutes of its September meeting, indicating the level of support for the governing council’s decision to increase interest rates by 25 basis points.

Markets will be watching closely for indications of how the ECB intends to proceed at its next meeting on 26 October, for which they are currently pricing a pause of rate hikes. The ECB raised interest rates by 25 basis points to a record high 4% during its September meeting, its tenth consecutive rate hike, signalling that it could be its last one, shifting its focus from raising rates to keeping them sufficiently high for as long as it takes to curb inflation. Nevertheless, hawkish members of the ECB’s Governing Council like Austria’s Robert Holzmann or Slovakia’s Peter Kazimir have indicated that despite growing fears of recession, the latest hike might not be the last.

However, on 29 September, Eurostat published its flash inflation data for September, projecting eurozone headline inflation to drop to 4.3%, down from 5.2% the previous month, after peaking at 10.6% in October 2022. Core inflation also slowed to 4.5% in September, down from 5.3% in August. These represent the lowest inflation figures in nearly two years, fueling hopes that the continuous downward trend could prompt a pause in the ECB’s rate hikes this month. Despite a potential peak in two years of global policy tightening, major central banks, including the ECB, are determined to maintain high interest rates to combat inflation. Last week, in her welcoming speech at the ECB Conference on Monetary Policy, the Bank’s head, Christine Lagarde, warned that the interest rates ‘’will be set at sufficiently restrictive levels for as long as necessary’’.

Thursday, 12 October – Deadline for Pfizer to offer concessions for its $43 billion acquisition of Seagen

On Thursday, the deadline for Pfizer to offer potential concessions to the European Commission for its proposed $43 billion acquisition of Seagen expires.

Pfizer, the US pharmaceutical company, announced the deal in March to acquire Seagen, a Washington-based pioneer of antibody-drug conjugates designed to target cancer cells, with the two companies targeting completion in late 2023 or early 2024. The European Commission has a decision deadline for Phase 1 of the deal on 19 October. The EU antitrust regulator may clear the deal after the completion of the preliminary review next week or initiate a four-month investigation if serious concerns about competition distortion arise.

Pfizer, seeking approval, did not receive a fast-track status for the deal, indicating potential antitrust considerations and the possibility of concessions. According to Pfizer’s announcement of the deal in March, the acquisition aims to ‘’enhance its position as a leading company in oncology’’, providing access to Seagen's drug development pipeline and proprietary antibody-drug conjugate technology.

The deal is also under preliminary investigation in the US, with the Federal Trade Commission (FTC) requesting in July additional information about the transaction.

Thursday, 12 October – New data flow agreement between the US and the UK to enter into force

On Thursday the new data flow agreement between the US and the UK will enter into force. The two allies agreed on the new framework last month. The agreement follows a deal signed in principle in June that would facilitate the free flow of data between the UK and the US through a new ‘data bridge’.

The new agreed framework will allow personal information to flow freely between the US and the UK, following confirmation that the surveillance laws of the two countries have high standards of privacy, adequately protecting their citizens’ data.

The deal is similar to the agreement reached in July between the EU and the US. However, that deal has come under scrutiny after French MEP Philippe Latombe announced he is challenging the deal before the European Union’s General Court since they do not guarantee EU data protection standards in the US.