What's happening this week? (21-01-19)
Monday, 21 January – May to make statement on Brexit ‘plan B’ as tensions intensify within parties
Acting in accordance with Dominic Grieves amendment, Theresa May today table a motion and make a statement on her work on a ‘Plan B’ Brexit, with the intention being to vote on the proposal the following Tuesday, 29 January. At this point, we do not expect May’s proposals to be substantially different from her original plan, with proposals for bilateral talks with Ireland likely to constitute the major change. The Prime Minister is happy to try and run down the clock in order to narrow Parliament’s options in future votes.
Parliament will respond to the Prime Minister’s continued prevarication with further efforts to take control of the Brexit process. As noted in our 17 January report, Tory MP Nick Boles plans to table an amendment to change standing orders which would in turn enable backbenchers to table a series of amendments which would remove the threat of ‘no deal’. Boles’ plan, or similar efforts to rule out no-deal, are understood to have the support of Cabinet Ministers who have so far remained loyal to May. Dominic Grieve has also prepared an amendment that would allow MPs to take control of the parliamentary schedule.
On the Labour benches, Jeremy Corbyn remains unwilling to endorse the idea of a second referendum, in part because it could trigger a series of resignations from his own front bench. As the possibility of a second referendum wanes, we expect that the Labour leader will find it harder to maintain the discipline of his MPs, the vast majority of whom want to avoid a crash Brexit. This too, should work in favour of an eventual endorsement of a soft-Brexit exit.
Monday, 21 January – Eurogroup to expose tensions over Italian budget fudge
The first Eurogroup meeting of 2019 is scheduled to establish a policy direction for the Eurozone over the coming year, setting out a timetable for agreement of legislative proposals relating to the Eurozone’s banking sector. Discussion is, though, set to turn to events at the end of last year. It is understood that the Dutch Finance Minister Wopke Hoekstra will use the opportunity of the meeting to raise misgivings about the manner in which, last December, the European Commission compromised on the Italian budget.
Although not currently on the agenda, Greek Finance Minister Euclid Tsakalatos is expected to present his government’s plan for an asset protection scheme to deal with Greece’s NPL overhang.
The Eurogroup is also due to ask for nominations for the candidacy for the ECB Chief Economist, with the term of current incumbent Peter Praet ending in May. The successful candidate will be selected at the 11 February Eurogroup, with Ireland’s Philip Lane currently believed to be the frontrunner.
Thursday, 24 January – First ECB meeting of the year to consider slowing Eurozone economy
We expect that the 24 January meeting of the ECB Governing Council (GC) will assess mounting risks to the Eurozone economy and consider an adequate response.
We do not yet expect that the ECB will alter its forward guidance to note that risks are tilted to the downside. As is its wont the bank will instead wait for further data to inform its assessment. As such, we do not believe that there will be any alteration to the guidance on future rate hikes.
Our assessment is that while a September rate hike is still possible, it would now require a sudden and sustained uptick in inflation as well as demonstrations of resilience from a weakening Eurozone economy. In the absence of these, we believe that the ECB rate lift off is likely to be delayed through winter 2019.