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Those are strings, Herr Kurz

Written by Javier Maquieira, senior associate 
Edited by Kevin Pringle, partner
11 October 2021

Good morning,

It hasn’t been a good year for conservative parties in Europe.
 
Ludovic Orban’s resignation in Romania, Boyko Borissov’s lost election in Bulgaria, Markus Söder’s and Armin Laschet’s electoral defeat in Germany, and the uncertain future for Czech prime minister Andrej Babiš all herald times of change as the European Union’s largest political force loses steam.
 
In a major hit accelerating this downward trend, the Austrian chancellor and chairman of the People’s Party, Sebastian Kurz, resigned on Saturday – only 10 months after becoming the country’s leader for the second time in a coalition government with the Green Party.
 
Once the youngest chancellor in Austrian history, Kurz has stepped down following four “chaotic” days since prosecutors announced a corruption probe targeting him and his party for allegedly using taxpayers’ money to bribe pollsters and media figures in return for positive coverage.
 
Although the Greens had pondered supporting a motion of no confidence scheduled by all opposition parties if Kurz refused to resign, the junior coalition party finally accepted the outgoing chancellor’s bargain: while resigning as head of government and nominating foreign minister Alexander Schallenberg as his replacement, he is to remain party chairman and retain direct leadership of the People’s Party in the national council.
 
Given that MPs enjoy legal immunity from prosecution, the move has been widely criticised, with opposition parties accusing Kurz of obstruction of justice and referring to him as “shadow chancellor”. As it happens, Kurz’s current position as leader of the senior party of the coalition cabinet means that he can continue to drive the centre-right party’s legislative agenda and influence key government ministries headed by partisan appointees loyal to him.
 
Kurz and his closest associates had already faced anti-corruption investigations in the past, not least the one relating to the infamous Ibiza affair, which cost the 35-year-old leader his first term in office after losing a motion of no confidence in parliament.
 
Yet the outgoing chancellor has consistently denied the claims. In his resignation statement, Kurz said the accusations were “manufactured” and insisted he would eventually be cleared of any criminal wrongdoing. He did so not without acknowledging some of the mistakes he had made, such as sending text messages to his deputies that do away with his carefully cultivated image as a selfless public servant.
 
This time, Kurz’s fall from grace feels different and part of a wider trend. Once a conservative star hailed as a model for Europe’s centre right, he has become yet another sign of the political camp’s demise. Whether Kurz will retain his ability to pull the strings of Austrian politics, however, remains to be seen.

News

The chief executive of the UK Health Security Agency has warned that people who get co-infected with flu and Covid-19 are at “more significant risk of death and of serious illness”. Jenny Harries, who is the former deputy chief medical officer for England, has encouraged everybody who is being offered a vaccine to get it ahead of an uncertain winter.
 
The Metropolitan Police will take “no further action” following a review prompted by a Jeffrey Epstein accuser who is taking legal action in the US against the Duke of York. Virginia Giuffre is suing Prince Andrew for allegedly sexually assaulting her when she was a teenager. The Queen’s son has consistently denied the allegations.
 
The president of Taiwan has responded to repeated threats from China’s leaders that it will one day take the island by pledging to continue bolstering Taiwan’s military defences. Tsai Ing-wen’s remarks, made at formal celebrations of the island’s national day in Taipei, follow one of the most tense weeks between China and Taiwan for decades.

Business and economy

The owner of Liberty Steel has pledged to restart its plants in Rotherham and Stocksbridge in South Yorkshire this month, saving the “substantial majority” of 1,000 jobs, by injecting £50m in cash into the business. The deal is part of a wider restructure of Sanjeev Gupta’s conglomerate, GFG Alliance, which said it had refinanced debts at its Australian steel and mining business.
 
The UK business secretary has told Sky News he is convinced Britain will not experience gas shortages this winter despite soaring wholesale gas prices around the world. Kwasi Kwarteng also insisted that domestic customers would not see a change to the energy price cap this winter.
 
The chief executive of food giant Kraft Heinz has warned consumers must get used to higher food prices as a result of a broad range of factors, including a rising inflation and shortages. Miguel Patricio, who admitted businesses would have to absorb some of the rise in costs, told the BBC that technology would eventually help improve the effectiveness of farms.

Columns of note

The Financial Times editorial board posits that Poland’s challenge to elements of EU law “poses a bigger challenge” to the bloc’s unity than Brexit. While the UK withdrew from the union, they argue, the Polish government is corroding its integrity from within. Although Poland’s tribunal has not been alone in questioning the supremacy of EU law, its ruling is a politically-inspired intervention without a proper legal case. Ultimately, the editorial board predicts a backlash against the government from a Polish public that remains strongly pro-European. (£)
 
Writing in The Times, Sam Laidlaw turns his attention to the slow growth in private research spending in the UK, which is currently standing below the OECD average as a percentage of GDP. In this piece, Laidlaw highlights the economic, public health, and climate change benefits of research and development, and calls on the UK government to commit to sustained and increasing investment, as well as to take the opportunities that it brings as businesses adapt and recover. Private investment, he concludes, will follow suit. (£)

Cartoon source: The New Yorker

Markets

The week ahead

The UK’s economic agenda will be led by two key announcements this week: the labour market figures on Tuesday and the August gross domestic product estimate on Wednesday. They are expected to offer a better sense of what is happening behind the HGV driver and abattoir worker shortages and upward pressure on wages.
 
Elsewhere, inflation will continue to be a topic of conversation this week, with consumer and producer price index data published for the US, India, Germany, Japan, France, and Italy.
 
In company news, the banking results season kicks off this week. JPMorgran Chase will provide a broader outlook on loan demand and overall consumer spending on Wednesday, while Goldman Sachs is due to report third-quarter earnings on Friday.
 
Meanwhile, on Thursday, investors will be eyeing the full-year results from British online fashion retailer Asos. Despite Boohoo’s market value drop last month, Asos serves a slightly different market, with the added benefit of already having distribution infrastructure in the US and Europe.

What’s happening today?

Trading announcements
Xp Power

UK economic announcements
(07:00) Manufacturing Production
(07:00) Gross Domestic Product
(07:00) Industrial Production
(07:00) Index of Services
(07:00) Balance of Trade

Source: Financial Times

did you know

Crows can recognise human faces and have been known to hold grudges against people they don’t like. (Source: @UberFacts.)

Parliamentary highlights

House of Commons

The House of Commons is in recess. The House will next sit on 18 October 2021.

House of Lords 

Oral questions
Home Office hiring the Black Dog crisis management company
 
Government consultation on access to Child Trust Funds by adults with a learning disability
 
Fiscal measures in pursuit of the government’s net zero emissions target
 
Expanding the UK’s Emissions Trading Scheme to include all forms of transport
 
Legislation
Health and Social Care Levy Bill (Supply and Money Bill) – second reading and remaining stages

Scottish parliament 

The Scottish parliament is in recess. The parliament will next sit on 26 October 2021.

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