Week Ahead (26 February)

W/C Monday, 26 February – European Commission likely to announce decision on Credit Agricole’s minority investment in payment services Worldline 

This week, the European Commission is likely to announce its decision on whether to allow Credit Agricole’s acquisition of a minority stake in Worldline.  

In January, Credit Agricole announced the acquisition of a 7% stake in Worldline, a French payment services company, as part of a strategic partnership aimed at establishing a joint venture in merchant payments. Subsequently, the two involved parties filed a notice of the proposed sale to the European Commission on 6 February.  

This development follows a challenging period for Worldline, marked by a significant decline in market value last year due to a downgraded sales outlook. However, in its statement, the French bank announced its goal ‘’ to support Worldline’s development and implementation of its strategy as a key European payment services provider". Preliminary work has already begun for the creation of the joint venture, which is expected to launch later this year pending regulatory approvals. This partnership marks Credit Agricole's re-entry into the payments sector after pausing a previous partnership with Wirecard due to well-founded concerns about the latter's accounting practices. 

W/C Monday, 26 February – European Commission likely to announce decision on the €1 billion acquisition of Dutch infrastructure firm DIF Capital Partners by CVC 

This week, the European Commission is also likely to announce its decision on whether to allow a deal between CVC’s acquisition of a majority stake in Dutch infrastructure investor DIF Capital Partners. CVC, a European private equity firm, announced the deal in September, amounting to approximately €1 billion in cash and shares.  

DIF manages assets totaling €16 billion and operates with over 200 professionals across 11 offices, focusing on infrastructure investments across Europe, North America, and Australia. CVC’s decision to purchase DIF reflects a broader trend among major private equity firms to venture into alternative asset classes such as private credit and infrastructure.  DG COMP may clear the deal after the completion of the preliminary review or initiate a four-month investigation if serious concerns about competition distortion arise. 

Thursday, 29 February – By-elections to take place in English constituency of Rochdale 

On Thursday, by-elections are scheduled to take place in the English constituency of Rochdale, caused by the death of Labour MP Sir Tony Lloyd. The upcoming by-election has raised concerns due to the withdrawal of mainstream party candidates and the entry of controversial ones. 

Initially, the vote was expected to be straightforward for Sir Keir Starmer’s Labour Party, following the party’s by-election victories in the constituencies of Wellingborough and Kingswood earlier this month where it overturned big Conservative majorities. However, Labour's campaign faced a setback when their candidate, Azhar Ali, was disowned by the party leadership due to allegedly antisemitic comments. Despite this, Ali remains on the ballot paper as Labour's official candidate, although if elected, he would sit in the Commons as an independent MP.  

Meanwhile, the emergence of George Galloway, a former Labour MP and founder of the Workers Party of Britain, as a candidate has also disrupted the race. Galloway's campaign, focusing on Gaza and promising to address local social issues, has resonated with some voters, particularly among the town's Muslim population, who make up about 30% of the electorate. Another emerging fringe candidate is Simon Danczuk, also a former Labour MP, who was suspended from the party for misconduct, and is now standing for the right-wing populist Reform UK. 

Overall, the withdrawal of candidates from Labour and the Green Party has increased Rochdale’s disappointment with the main parties and has further limited voters' choices, rendering Thursday’s vote result unpredictable. 

Friday, 1 March – Eurostat flash inflation estimate for February 

On Friday, Eurostat will release its flash inflation estimate in the eurozone for February, a week before the next monetary policy meeting of the General Council (GC) of the European Central Bank (ECB). Inflation dropped to 2.8% in January, down from 2.9% the previous month. The news came only a week after the ECB decided to keep its rates unchanged for a third consecutive time, at a record high of 4%, amid a worsening economic outlook.  

In December, the ECB lowered its inflation forecasts for the next two years, projecting that the headline rate will run at 5.4% in 2023, falling to 2.7% in 2024 and 2.1% in 2025. Also, according to the Commission’s Winter Economic Forecast, released earlier this month, inflation rates in the euro area are forecast to decline from 5.4% in 2023 to 2.7% in 2024 and 2.2% in 2025. It also revised its forecast for economic growth and the eurozone downward for the year, citing the impact of higher interest rates on economic activity. It now expects GDP to grow by 0.8% in the eurozone, down from the previous forecast of 1.2%. 

Yet, the minutes of its January meeting indicated that the GC is still wary of inflation, due to a series of factors, including elevated wage growth, scrutiny on corporate profits, and disruptions in the Red Sea shipping, threatening supply chains. Although there was a notable acknowledgment of the easing inflationary pressures, Eurozone central bankers agreed that it was still premature to discuss rate cuts, reiterating the need to follow ‘’a data-dependent rather than a calendar-based approach was important’’. Hence, although most members of the GC support cutting rates this year, there is growing divergence on when to initiate the process.  

Dovish elements of the GC are publicly making the case for not waiting too long for monetary policy easing.  ECB Executive Board Member Piero Cipollone and Bank of Italy Governor Fabio Panetta have called for cuts sooner rather than later while France's Francois Villeroy de Galhau warned earlier this month that ‘’acting gradually and pragmatically can be preferable to deciding too late and then having to over-adjust'’ and that “the risk of cutting too late is at least as big as too early”.   

On the other side of the debate, Austrian Central Bank Governor Robert Holzmann stated that he did not see circumstances where the ECB would cut rated before the FED, citing Red Sea tensions as one of the main impediments to rate cuts, while Bundesbank President Joachim Nagel said last week that the ECB should resist the temptation to cut rates early.  Last Friday, ECB Executive Board Member Isabel Schnabel also gave a presentation at Bocconi University in Milan where she reiterated her view that the “last mile” of disinflation was the most difficult. Also on Friday, ECB’s President, Christine Lagarde, stated that despite the ‘’reassuring’’ wage figures for Q4 2023, additional data will be needed for the Bank to ensure that inflation will not resurge. 

The diversion of opinions within the GC is also reflected in the latest projections of investors, who, according to a Bloomberg survey, assign about a 50% chance of a cut in April.