Week Ahead (14 October)

W/C Monday, 14 October – European Commission to rule on X’s gatekeeper status under the Digital Markets Act 

This week, the European Commission is expected to announce its decision on whether to classify Elon Musk’s social media platform X as a ‘’gatekeeper’’ under the Digital Market Act. 

In September 2023, the Commission confirmed its initial list of six tech companies qualifying as "gatekeepers" under the DMA: Apple, Alphabet (Google), Amazon, Meta, ByteDance (TikTok), and Microsoft. Companies with an annual turnover exceeding €7.5 billion, a market capitalisation over €75 billion, and active monthly users in the EU totaling 45 million are subject to these rules. The Commission has the authority to investigate the actions of gatekeepers and impose fines of up to 10% of their global turnover from the preceding year if they breach the DMA. As previously reported, it has already launched full-scale investigations into the compliance of Apple, Google, and Meta with the DMA, aiming to conclude these within 12 months. In May 2024, the Commission also named Booking.com as a gatekeeper, marking it as the first European tech platform to receive this designation.   

While X acknowledged in March 2024 that it meets the user threshold for a gatekeeper designation, it argued that it does not qualify in other areas, particularly as a gateway between businesses and consumers. This argument led to an investigation by the European Commission in May to assess whether X's data was reliable and if it indeed functions as an essential platform in the digital economy.  Nevertheless, sources cited by Reuters last week suggest that X will avoid being designated a gatekeeper, mainly because of its significantly smaller influence over the digital economy compared to the existing gatekeepers.  

W/C Monday, 14 October – Lithuania braces for second round of general elections following first round victory of the centre-left 

On Sunday, Lithuanians voted in the first round of general elections, confirming a shift to the left as the opposition Social Democrats and smaller centre-left parties look poised to replace the current centre-right coalition. The ruling Homeland Union, led by Prime Minister Ingrida Simonyte, has been in power since 2020 but has faced growing criticism, despite overseeing solid economic growth and low inflation rates within the EU. Public dissatisfaction has largely centred around Simonyte’s handling of COVID-19 measures and the ongoing migrant crisis along the border with Belarus. 

Although Lithuania has enjoyed annual double-digit personal income growth and relatively low inflation compared to other EU countries, these successes have not translated into strong support for the government. Instead, frustrations over domestic issues, particularly around migration and social inequality, have dominated voter sentiment. Lithuania has accused Belarus of intentionally sending migrants across the border as part of a broader strategy backed by Russia. 

In the first round of the elections held yesterday, the opposition Social Democratic Party of Lithuania (LSDP), led by MEP Vilija Blinkeviciute secured 20% of the vote with around 90% of ballots counted, placing it ahead of the ruling Homeland Union, which is expected to finish in second place with 17% of the vote. Nemuno Ausra (Dawn of the Nemunas), led by right-wing politician Remigijus Zemaitaitis, received 14%. Runoffs in single-member constituencies are scheduled for 27 October. 

Last night, Blinkeviciute expressed her intent to form a ruling coalition with two other parties, Farmers and Greens Union and For Lithuania, which could pave the way for a centre-left government. However, the final composition of the government will not be clear until after the runoff elections, which will decide the remaining single-member seats. The Social Democrats are expected to win 18 seats in the 70-seat proportional party-list vote, followed by the Homeland Union with 17 seats, Nemuno Ausra with 14 seats, For Lithuania with 8 seats, Liberal Movement with 7 seats, and the Farmers and Greens Union with 6 seats. The remaining 71 members of the Seimas will be elected through single-member constituencies. So far, eight candidates have won these seats in the first round, with runoffs for the remaining 63 constituencies scheduled for 27 October. 

Despite this election’s focus on domestic issues like inequality and migration, Lithuania's foreign policy is unlikely to shift dramatically, even if the Social Democrats gain power. The country’s strong stance on Russia and support for Ukraine is a consensus shared across the political spectrum, and President Gitanas Nauseda, who was re-elected earlier this year, remains influential in shaping foreign policy. He will continue in office regardless of the election's outcome. 

Tuesday, 15 October – Member states to review draft conclusions on the European Commission White Paper on the future of digital connectivity 

Tomorrow, the Council working group on Telecommunications and Information Society will meet in order to finalise its draft conclusions on the Commission’s White Paper on the future of the EU’s digital infrastructure.  

Published in February 2024, the report noted a financing gap of around €200 billion for the bloc to achieve its Digital Decade goals for 2030. Subsequently, the Commission initiated a public consultation to gather feedback from a broad spectrum of stakeholders—including member states, civil society, industry, and academia—on the scenarios outlined in the White Paper to inform future proposals. Mario Draghi’s report last month identified Telecom sector fragmentation in Europe as a major obstacle to innovation and investment, echoing a similar argument made by Enrico Letta in his own report in April. Draghi also emphasised the need for higher levels of investment in connectivity to support next-generation technologies like 6G and AI. He also proposed the harmonisation of spectrum licensing at the EU level and an initiative to make big tech firms contribute financially to the costs of the digital rollout. 

In past weeks, member states have been discussing their own views on the White Paper, which could serve as the blueprint for a Digital Networks Act next year. Market consolidation has been among the most contentious points in the discussions with economically liberal-minded member states opposing a more flexible merger policy in contrast with countries such as France favouring the creation of European champions in order to narrow the gap in innovation with China and the US. 

In their 24 September meeting, the Hungarian Council Presidency was forced by more sceptical EU capitals to drop its explicit reference to market-driven consolidation in the Draft Council Conclusions on the White Paper.  On 4 October, the Council working group on telecommunications and information society reconvened in order to discuss its views on the White Paper. Although the wording on consolidation has been partly toned down, the revised version is still largely in line with the original compromise proposal of September, indicating openness to telecom consolidation as long as ‘’it is assessed by the relevant authorities taking into consideration its potential impact to maintain and develop effective and sustainable competition in the relevant market.’’ They also acknowledged that ‘’subject to such assessment, market driven consolidation, could foster investment create economies of scale in electronic communications networks in the EU and thus open up further opportunities for growth, investment and innovation.’’ 

The revised text will be reviewed in the upcoming working party scheduled for 15 October, with the final version expected to be approved during the meeting of the EU digital ministers in December. 

Thursday, 17 October – ECB Governing Council to meet with another rate cut priced in 

On Thursday, the European Central Bank’s Governing Council will hold its monetary policy meeting with another rate cut widely priced in. 

In June, the Governing Council of the European Central Bank (ECB) announced its first rate cut in five years, from an all-time high of 4% to 3.75%. After maintaining rates at 3.75% in July, the ECB cut rates by a further 25 basis points at its 12 September meeting to 3.50%. The decision came against the backdrop of inflationary easing, after inflation eased to 2.2% in August, down from 2.5%, reaching its lowest point in three years, along with weakening wage growth and economic activity. Earlier this month, Eurostat revealed that inflation in the euro area dropped further to 1.8% in September, falling below the target of 2%, mainly due to declining energy prices.  

Indicatively, a recent Reuters poll showed that over 90% of economists (70 out of 75) now predict an October rate cut, a sharp increase from just 12% last month. This would bring the deposit rate down to 3.25%, with another reduction likely in December. Furthermore, ECB President Christine Lagarde suggested this move at a European Parliament hearing on 30 September, stating that “the latest developments strengthen our confidence that inflation will return to target in a timely manner. We will take that into account in our next monetary policy meeting in October.” However, core inflation remains at 2.7% and is expected to ease more gradually. Bank of Greece Governor Yannis Stournaras also indicated that rates will likely be reduced to 3% by year-end, but warned, “They will still not drop below 3%.” Any further rate cuts, he noted, would more likely occur in 2025.   

While inflation continues to fall, the euro zone economy is expected to show only modest growth, with 0.2% of projected growth in Q4 and 0.7% for 2024, before picking up slightly to 1.2% in 2025. Germany, the bloc’s largest economy, remains sluggish, projected to contract in 2024 for the second consecutive year, with only a gradual recovery over the next two years. Despite these weak growth prospects, the focus for the ECB remains firmly on inflation. As Banque de France Governor François Villeroy de Galhau noted, “our compass for monetary policy and rate cuts is first and foremost inflation,” indicating that any further moves will depend on how quickly core inflation stabilises near the ECB’s target. 

Thursday, 17 October – Friday, 18 October – European Council to discuss competitiveness, Ukraine, the Middle East and migration 

Later this week, the European Council will focus on competitiveness, including the need to enhance the single market and advancing the bloc's green and digital transitions in light of geopolitical tensions and aggressive international subsidy policies, particularly from global economic rivals like China. EU leaders will also revisit Europe’s long-term economic strategy, building on discussions from earlier this year about enhancing EU competitiveness. Following recommendations from recent reports by Enrico Letta and Mario Draghi, they will evaluate progress on reducing dependencies in key strategic sectors and advancing Europe’s standing as a leader in industry and technology.  

The topic of competitiveness will also be a central theme at the informal European Council in Budapest on 8 November, where a declaration is expected to be adopted based on the Draghi report, in line with the April European Council conclusions and the Strategic Agenda 2024-2029. Over the coming months, EU institutions and stakeholders will discuss the financial and political instruments needed to implement the competitiveness goals, including the deepening of the Capital Markets Union (CMU). 

Turning to Ukraine, the European Council will review military and financial support, focusing on air defence systems, ammunition, and winter preparations for the country’s energy infrastructure. Leaders will also discuss how to utilise revenue from Russia’s frozen assets for Ukraine’s reconstruction and examine additional measures to tighten sanctions enforcement. 

The worsening situation in the Middle East is also part of the agenda. EU leaders are expected to call for immediate ceasefires along the Lebanese-Israeli border and in Gaza, as well as the release of all hostages. They will also address escalating violence in the West Bank. Migration is also expected to be a contentious topic in this week’s discussion, as leaders will look to iron out common language on deportation policies, reflecting a broader conservative shift across the bloc.