Week Ahead (16 December)

Monday, 16 December – German Chancellor Scholz faces a confidence vote in the Bundestag, setting the stage for snap elections

Later today, Chancellor Olaf Scholz is set to face a confidence vote in the German Bundestag, a move that will almost certainly pave the way for snap elections on 23 February.

The German "traffic light" coalition, comprised of Scholz’s SPD, the Greens, and the fiscally-conservative FDP collapsed in early November following disagreements over the 2025 Budget. Escalating conflicts over fiscal policy and economic strategy culminated in Chancellor Olaf Scholz’s decision to dismiss the Finance Minister and FDP’s leader Christian Lindner. Scholz cited Lindner’s repeated obstruction of government initiatives and refusal to relax spending rules as key reasons, particularly his resistance to funding additional aid for Ukraine. The above development prompted Scholz to call for a confidence vote this month.

A clear majority of lawmakers are expected to withdraw their confidence in the chancellor. Notably, his junior coalition partners, the Greens, have already explicitly stated that they will abstain from the vote. However, even with their support, Scholz would still fall short of the required 367 votes.  Once the vote is lost, Scholz will formally request that German President Frank-Walter Steinmeier dissolve the Bundestag, triggering snap elections within 60 days.

The centre-right CDU/CSU is currently first in the polls with 32%, far ahead of the far-right AfD and the ruling SPD, which are polling at 18% and 16%, respectively. The Greens follow with 13%, while the hard-left BSW is on 6%.  Given these polling rates, a grand coalition between CDU/CSU and SPD is expected in Germany, though current polling rates suggests they will need a third junior partner, largely due to a very fragmented political landscape due to the popularity of AfD and BSW. CDU has ruled out any cooperation with the AfD. This potentially leaves CDU and SPD with only two options: either the Greens or the FDP. FDP would be a better fit for the conservatives but not for the SPD, given their fallout in November over very conflicting fiscal approaches. The Greens have frequently clashed with the CDU on issues like immigration and climate policy. The Greens’ leverage would further increase in case the FDP fails to reach the parliamentary threshold, rendering them the ultimate kingmaker.

The next coalition is shaping up to be as complex and potentially fractious as the last. Meanwhile, the German economy is expected to contract for a second consecutive year in 2024 before slowly recovering (1.1%) in 2025, per the latest projections.  Nevertheless, its economic rebound could be further undermined by the prospects of US tariffs, which are likely to be introduced by Trump’s new administration in 2025.

Monday, 16 December – Contract for EU’s IRIS2 satellite constellation project to be signed

Today, the contract to officially launch the IRIS2 project is set to be signed between the European Commission and the SpaceRISE consortium, comprising SES, Eutelsat, Hispasat, and various subcontractors like Thales Alenia Space, OHB, and Airbus Defence and Space. IRIS2 aspires to become the EU’s own version of Elon Musk’s Starlink constellation, by utilising numerous small satellites in low Earth orbit to provide internet services.

Earlier this year, Airbus and Thales unexpectedly withdrew from leading the SpaceRISE consortium, a significant shift that occurred just before the final offer deadline on 25 July. The two aerospace giants cited concerns over financial risk, opting instead to contribute as contractors. This restructuring cast doubt on the project’s timeline, pushing the expected operational date from 2027 to 2028 or later.

The IRIS2 system will consist of approximately 290 satellites and accompanying ground systems, leveraging a public-private partnership (PPP) model with contributions from:

·       €2.4 billion from EU funds.

·       €685 million from the European Space Agency (ESA).

·       Additional funding from future EU and ESA budgets, bringing the total estimated cost to €11.4 billion.

Signing off the contract this week will finalise the procurement phase and allow development to move forward. The system, which is seen as key to Europe’s quest for digital sovereignty and strategic resilience, is expected to reach full operational capability by the early 2030s, even though partial deployment will likely occur sooner.

Wednesday, 18 December – New Dail meets for first time after general election

On Wednesday, the 174 elected Members of the 34th Dáil Éireann, representing 43 constituencies, will take their seats for the first time. 

The big winners from the 29 November general election were Micheal Martin’s Fianna Fail (FF) party.  The party finished with 48 seats, 10 ahead of Fine Gael (FG) who finished in third on 38 seats and 9 ahead of Sinn Fein on who finished with 39 seats.

It is all but certain that FF and FG will re-enter government together.  Some uncertainty remains around the conditions – given that FF has 10 more seats, questions arise as to whether it should share the office of Taoiseach with FG on the same terms as the outgoing administration.  There was some suggestion from FF that Micheal Martin should hold the office for 3 out of the 5 years – instead of rotating it after 2.5 years.  Furthermore, the party gave some indications that it wanted a say over cabinet appointments.  In any case, these are minor disagreements which we don’t see prolonging the process of government formation. 

The main uncertainty revolves around who will support FF and FG.  They have a combined 86 seats – two short of the required 88 for a majority.  While FF had expressed a preference for the Labour party (11 seats), Labour are divided on this subject with party leader Ivana Bacik and a majority of the parliamentary party opposed to entering government with FF and FG.  The 11 seats of the Social Democrats would also enable a comfortable majority but the view among FG in particular is that these would prove awkward coalition partners. 

The preference therefore appears to be around securing the support of Independent TDs.  A group of 9 TD have organised themselves into a group known as the “Regional Group”, consisting of Sean Canney, Marian Harkin, Barry Heneghan, Noel Grealish, Michael Lowry, Kevin (‘Boxer’) Moran, Verona Murphy, Carol Nolan and Gillian Toole.  Ideologically, there is no difference between this group and FF/FG – indeed many of them are former members.

Galway East TD Sean Canney and Longford–Westmeath TD Kevin ‘Boxer’ Moran were previously part of the 2016 FG-led government as part of a group of six independents known as the Alliance group.  FG found doing business with this group to be quite straightforward so there is a lot of momentum towards agreeing a programme for government.  The 9 seats would given the government 95 seats and a 7 seat majority

An early test of how committed FF and FG are to entering government with this group will come on Wednesday when the Dail returns.  The Regional Group has asked that FF and FG support its nominee for Speaker of the House (Ceann Comhairle), Verona Murphy, herself an ex FG candidate.  However, several FF TDs, including the incumbent Sean O Fearghail, are thought to be interested in the role.  Some backbench elements within FG have also expressed a lack of enthusiasm for Murphy, given her acrimonious departure from the party in 2020 after making controversial comments about immigrants.  The vote for Ceann Comhairle is by secret ballot so it remains to be seen whether backbenchers in FF and FG can be corralled into supporting Murphy in order to smooth the process of government formation. 

Thursday, 19 December – Deadline for Commission’s Phase 1 decision on F1 owner Liberty Media’s acquisition of MotoGP’s parent company

By Thursday, the European Commission will have to decide whether to approve or launch an in-depth (Phase 2) investigation into F1 owner Liberty Media's €3.5 billion deal to acquire MotoGP's parent company Dorna.

Latest reports suggest that the Commission’s new competition chief, executive vice-President Teresa Ribera has voiced concerns that the merger could stifle competition by consolidating significant market power across two motorsport categories with broad global appeal. With both Formula One and MotoGP commanding substantial audiences and lucrative media rights, the EU's ongoing investigation aims to assess whether the deal would limit consumer choice, raise prices, or reduce innovation in motorsport broadcasting.

Liberty Media announced the deal in April. The transaction includes Liberty acquiring an 86% stake in Dorna, with the company’s current management retaining the remaining 14% equity share. Subsequently, on 14 November the two parties filed a notification with the European Commission. If approved, the merger would significantly bolster Liberty's motorsport portfolio, following its 2016 acquisition of Formula One for $4.4 billion.

In the likely event that it gets initiated this week, a Phase 2 investigation would delve deeper into the potential competitive consequences of the deal. This would require Liberty Media and Dorna to offer further concessions in order for the deal to be approved, delaying the finalisation of the merger into next year. According to the deal’s agreement, failure to conclude the deal by year’s end would result in Liberty Media paying Dorna an additional fee of €126 million.

Thursday, 19 December – Last European Council for 2024 largely to focus on foreign affairs

The European Council’s final meeting of 2024, chaired for the first time by its new President Antonio Costa, will convene on 19 December in Brussels. October’s Summit largely focused on EU competitiveness following the publication of Mario Draghi’s report on the future of the bloc’s industry. However, against a backdrop of escalating global tensions, EU leaders this time will focus on an agenda dominated by pressing foreign policy issues.

More specifically, at the forefront is Ukraine, where Russian advances in the Donetsk region have intensified the need for EU military and civilian support. EU leaders will assess ongoing deliveries of air defence systems, ammunition, and missiles, alongside the training of Ukrainian forces. They will also aim to end Hungary’s veto on €6.6 billion in European Peace Facility (EPF) reimbursements to countries for weapons donated to Ukraine, in the likely absence of a breakthrough at the Foreign Affairs Council today. Ukrainian President Volodymyr Zelenskyy is also set to attend the meeting.

The Middle East will also feature prominently, as the EU is still struggling to respond to recent developments, including the toppling of Bashar al-Assad’s regime in Syria and the ceasefire agreement between Israel and Lebanon. With violence continuing in Gaza and the West Bank, leaders will discuss ways to contribute to de-escalation and the delivery of urgent humanitarian aid to affected populations.

Overall, global affairs will dominate the Summit as EU leaders are bracing for the return of Donald Trump to the Presidency in January along with evolving dynamics in trade relations with China.

Thursday, 19 December – Bank of England committee to decide on interest rates, likely to maintain rates following inflationary uptick

The Monetary Policy Committee (MPC) of the Bank of England (BoE) will convene its final meeting for 2024 on Thursday, with a pause in rate cuts widely priced in. In the previous November meeting, the BoE dropped rates by 25 basis points to 4.75%. In August, the MPC announced its first interest rate cut since March 2020.

The UK’s economic climate is marked by a mix of conflicting signals. Inflation surged to 2.3% in October and is projected to rise further to 2.5% in November, driven by robust wage growth and lingering price pressures in the services sector. These dynamics place Britain among the G7 economies most at risk of high consumer price growth in 2025, according to the OECD. In addition, Finance Minister Rachel Reeves’ budget may complicate the BoE’s plans for continued cuts. The budget, unveiled last month, introduced significant tax increases and spending on public services, with the Office for Budget Responsibility, the UK’s fiscal watchdog, raising its inflation forecast for next year to 2.6%, up from 1.5%.

Despite these inflationary trends, economic growth remains subdued, with weak consumption, stagnating business investment, and concerns about long-term productivity weighing on the economy. Earlier this month, Swati Dhingra, one of the most dovish members of the MPC, emphasised the need for further rate cuts, arguing that the current policy stance is excessively restrictive and harmful to the UK's supply capacity. Globally, the BoE faces pressure as the European Central Bank and the U.S. Federal Reserve move more aggressively to ease monetary policy. However, BoE Governor Andrew Bailey has reiterated the importance of a measured approach to rate changes.

Financial markets predict no rate cut on Thursday and a cautious reduction trajectory for 2025, with three quarter-point cuts expected by the end of that year. This week’s meeting will set the tone for the BoE’s monetary strategy heading into the new year.

Friday, 20 December – Deadline for Commission’s Phase 1 decision on Nvidia’s $700 million acquisition of Run:ai

By Friday, the European Commission will have to decide whether to approve or launch an in-depth (Phase 2) investigation into Nvidia’s $700 million acquisition of Run:ai, an Israeli startup. This case marks a pivotal test of the EU’s ability to scrutinise mergers in high-innovation industries following recent legal setbacks. The Court of Justice of the EU (CJEU) September 2024 ruling on the Illumina-Grail merger has curtailed the Commission’s power to address “killer acquisitions” under Article 22 of the EU Merger Regulation, creating a more challenging environment for regulators to intervene in deals involving startups with limited revenue but significant market impact.

Nvidia’s proposed acquisition has sparked considerable concern among advocacy groups, competitors, and policymakers.  Critics argue that the deal would entrench Nvidia’s dominance in the supply of advanced graphics processing units (GPUs), a critical technology underpinning the AI sector, and increase Europe’s dependency on a single supplier. A group of advocacy organisations last week sent a letter to DG COMP calling for the launch of an in-depth (Phase 2) investigation.

An earlier deadline for the submission of concessions expired last Friday, and it remains undisclosed whether the two parties opted for remedies to ease competition concerns. In the absence of sufficient remedies, Phase-2 is likely to be launched. The Commission’s decision in this case will set an important precedent for its handling of future mergers in high-tech sectors. Brussels’ increased scrutiny over ‘’killer acquisitions’’ may intensify friction with US-based tech and pharma giants, who view EU regulatory actions as disproportionately stringent. The new Competition Commissioner, Executive-Vice President Teresa Ribera will need to manage these tensions while maintaining a level playing field for European and international firms.