Week in Review (1 February)

ECB to finesse forward guidance with market expectations survey, as Italy tips into recession

On 30 January the ECB announced that starting from April 2019 it will launch a Survey of Monetary Analysts. This will run eight times a year. The survey will gather information from a cross section of market participants’ expectations of the future evolution of the ECB’s policy parameters. The launch of the survey will provide the GC with hard data on expectations and could lead to a more responsive forward guidance.

That market expectations are now firmly for a rate hike to be delayed beyond 2019 is largely down to mounting indications of a slowing Eurozone economy. Italy is set to pose a particular problem, with the country entering into recession following a 0.2% GDP contraction in Q4 2018. Contraction in the Italian economy could push its deficit / GDP ratio towards 3% across the course of 2019. This could reopen strains between Italy’s populist government and the European authorities.

OECD agrees approach to close digital tax loopholes by 2020

The OECD announced this week that it would re-examine so-called ‘nexus’ rules – namely how to determine the connection a business has with a given jurisdiction – and the rules that govern how much profit should be allocated to the business conducted there. Clearly such a move could be impactful for smaller jurisdictions such as Ireland and Luxembourg although in Ireland’s case many multinationals have already taken steps to move towards a local selling structure which means advertising profits are booked locally, rather than through company headquarters in Dublin.

A public consultation will be held on 13 and 14 March 2019 in Paris as part of the meeting of the Task Force on the Digital Economy and the consultation document will be published in the coming weeks. The OECD, which covers 90% of the global economy has committed its members to finding a solution this year with a view to implementation in 2020.

Further French trouble for Google advertising services…

On 31 January when the French competition authority issued interim measures against Google in an ongoing investigation into its advertising practices.

While some of the measures relate specifically to Amadeus – the complainant company in the case - the authority has made clear that the implications are much wider stating that while Google is free to determine its content policy, that policy ‘must be sufficiently intelligible to economic stakeholders and be carried out in an objective, transparent and non-discriminatory manner so that all advertisers in the same sector are treated equally.’

At a European level, a fine against Google Adsense is already expected to be levied in the coming weeks. The concern for Google is that the relatively conventional competition aspects of these complaints will be supplemented by further probes examining competition concerns around data, following last week’s French GDPR fine.

…amid another tough week for tech

Although Facebook enjoyed a good week in the financial markets, having added 5 million users in the US and Europe, the regulatory onslaught against the company continues. This wee both the Irish data protection authority and the Federal Minister of Justice and Consumer Protection expressed significant reservations to the company’s plan to integrate all of its messaging services

Uber was forced to withdraw its Uber X service from Catalunya after the Catalan regional government imposed serve restrictions on the company’s ability to operate.