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What's happening this week? (18/02/19)


Tuesday, 19 February – Final vote in Dutch Senate on remote gambling bill


The 12 February debate around the remote gambling bill shed more light on how unlicensed operators, and those operators who had previously received fines, will be treated under the new licencing regime. Minister Dekker asked the Senate to vote against a motion put forward by the Socialist Party to exclude parties that have illegally operated in the Dutch market from eligibility for a licence for a period of five years. The Minister said his view was a lot closer to the motion proposed by Senator Postema of the PvdA who asked for a two-year exclusion period.


The Dutch Senate does not have the power to amend a bill but can accept or reject it in its entirety. However, normal procedure requires the Minister to take the view of the Senate on board when formulating policy. The tone of the debate from Senators and from Minister Dekker strengthens the likelihood that companies that have run into trouble with Dutch authorities due to the illegal provision of online gambling will face a cooling off period for a minimum of 18 months before being granted a licence to operate in the Netherlands.


Thursday, 21 February – ECB minutes to give insight into Governing Council (GC) assessment of stumbling Eurozone growth


In his press conference following the 24 January meeting, Mario Draghi suggested that there are currently two schools of thought in the GC about the nature of the economic slowdown. The balance of these groupings should become clearer in the minutes, as should the GC thinking on if or when forward guidance should be changed.


The ECB has in the past opted to take decisions on its forward guidance when fresh data is available. The publication of the next set of ECB staff projections, in conjunction with the 7 March GC meeting, would provide an opportunity for this. It is possible however, that the GC will continue to want to wait and see, particularly given that Mario Draghi’s term ends later in the year. Stretching the guidance on rate hikes could be viewed as tying the hands of his successor.


Further information on the state of the Eurozone economy will become available on the same date as the ECB minutes, with the publication of flash PMIs for both Germany and

France.


Thursday, 21 February – May expected to meet Juncker in Brussels following latest Commons embarrassment


We disagree with media reports that last Thursday’s Commons defeat will have much significance for the May-Brussels relationship. The EU is already well aware of the difficulties the Prime Minister has with parliament. May is scheduled to visit Jean-Claude Juncker this week – with Thursday touted as the likely date – where talks are again likely to be cordial without reaching any decisive breakthrough.


Given that Theresa May’s strategy is now largely based on winding the clock down toward a possible ‘take it or leave it’ vote, any decisive movement on Brexit in the coming weeks may be more likely to come from the Labour party – either through the successful re-emergence of Yvette Cooper’s bill to extend Article 50 or from Labour MPs declaring a willingness to back Theresa May’s deal.


The strain that Brexit is beginning to put on Labour is set to be demonstrated this afternoon, as a number of pro-EU MPs – about 5 in number – are set to announce their departure from the party. Splits in Labour, coupled with de-selection campaigns against pro-EU Tories, is likely to weaken the cohesion of groups proposing alternatives to a Brexit broadly based on Theresa May’s deal.

Friday, 22 February – Fitch to review Italy sovereign rating as government statements keep market on edge


The Italian economy as a whole is now in recession and being overseen by a government that is prone to spook the markets. The latest such scare came last Friday, when influential Lega member Claudio Borghi said that if Europe was not changed in the forthcoming elections, then Italy would need to consider leaving Europe.


The continued volatility of the government is likely to play on the minds of Fitch when they issue the first sovereign review of Italy in 2019. Considering the nature of this government alongside the weak prospects of the Italian economy – confirmed by Fitch itself in a forecast published on Friday, which sees Italian growth at 0.3% for the year – a ratings downgrade cannot be ruled out. If Italy is downgraded, further volatility in its sovereign bond yields would be likely.


The contradictions in the Lega-M5S coalition will be clear again today as M5S members hold an online vote on whether to grant Matteo Salvini immunity in a migration related ‘kidnapping’ investigation. While M5S had in the past railed against the use of parliamentary immunity, M5S Deputy Prime Minister Luigi di Maio has implicated himself in the decisions for which Salvini is been investigated, making it likely that his party members will move to block the probe.

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