Week Ahead (28 October)

w/c 28 October, Another blockbuster week for Brexit

Today, the government will table another motion calling for a 12 December election. This looks unlikely to reach the two-thirds threshold required under the fixed term parliament act unless the Labour leadership has a change of heart between now and 5pm.

Assuming the government motion fails, the Liberal Democrats and Scottish National will join forces to table a motion to amend the fixed term parliament act which would see a simple majority approve a 9 December election, provided EU leaders grant the U.K. an extension until 31 January. This extension was granted this morning. Labour has ruled out supporting the initiative, but the government has indicated that it might support it as the most realistic means of getting a December election. Should this attempt fail, the Scottish National Party has indicated that it could table a vote of no confidence in Johnson under the fixed term parliaments act later in the week. Should this SNP initiative succeed, Parliament would be dissolved this week and an election held on 5 December.

w/c Monday 28 October, Germany to digest victory by far-left and far-right forces in Thuringia

As anticipated in our preview piece, regional elections in Thuriniga saw the far-left Die Linke top the poll, albeit on a higher than expected 31% of the vote. The far-right party, Alternative for Germany (AfD) saw its share of the vote more than double from 10.6% in the 2014 to 23.4%. Merkel’s CDU, which came first in 2014, finished third on 21.8% while its coalition partners at national level finished fourth with 8% of the vote. The outgoing coalition of the Die Linke, Greens and SPD will not have enough seats to form a majority and with all parties ruling out joining forces with AfD, this could be a drawn-out process. Investors will be wary of German voters turning to the far right and left at a time when the economy is struggling.

Friday 1 November, Following S&P upgrade, Greece optimistic DBRS will follow suit to leave it two notches below investment grade

On Friday, S&P upgrade Greek debt to BB- from B+, leaving Greek debt three notches below investment grade. Arguably more significant, will be this coming Friday’s review by DBRS. DBRS is seen as the least stringent of the major credit ratings agencies. In May, DBRS upgraded Greek debt to BB (low) from B (high). Another upgrade will see Greek debt just two notches below investment grade.

Friday 1 November, Lagarde to officially take office as ECB president

On 1 November Christine Lagarde will replace Mario Draghi as ECB president. Her immediate challenge is to quell dissent on the Governing Council over Draghi’s monetary policy. In this, she might be helped by the nomination to the ECB Executive Board of Isabel Schnabel. The new German board member is an accomplished economist at Bonn University and is more amenable to unconventional monetary policy than the German orthodoxy. Her presence may help the board in solving three problems: the divisions over QE, the shortage of trained economists and the lack of female representation.