This is yet another week where you may count your blessings. With Trump heading right-of-centre with some of his senior appointments, making one wonder about what awaits in 2017. SARB likely not moving a hair this week, though reportedly still trigger happy, but then do consider our weird local and global context. Rating agencies having to decide to pull plugs or leave them plugged (for now). Zuma trying to explain to cadres how they should behave. 

And then there is Europe. 

Our fortune will not only be decided by Zuma blowing off course, and Trump going full blast. There is also the matter of Europe. After near fatal collisions over Greece and peripherals generally, Europe seemed to be coming back, until the Syrian refugee crisis & Putin showed up its true external weaknesses. 

But that was before Brexit & Trump. Reminders that elite governments may succeed in fudging crises, but electorates have the final say about what they really want, if you let them. 

Throughout 2016, populist right wing forces in Europe have been mobilizing, smelling blood so to speak. With elite governments famously not listening to their electorates, more shock potential was brewing. 

But it hasn't been plain sailing. 

Germany is by far the most important part, the anchor of the European system. And although populists have made inroads, the percentages remain low even if rising. Merkel this week offered herself for a fourth term. She will likely make it as the Grand Coalition sails on, to be decided by October 2017. 

Meanwhile, Italy will within a few days hold a referendum which prime minister Renzi may lose. According to some, a death blow. According to others nothing of the kind. 

If Germany is probably still far too serious to drop Merkel, and Italy doesn't succeed in dropping Renzi with a referendum result, ignored when it suits, France seems to be heading for a finale with Trumpian flourishes. 

This past weekend, French conservatives held their first of a two-round elective conference. Sarkozy dropped out (possibly targeted by newly minted left-leaning party members, for €2 gaining the right to participate, possibly ensuring that Sarkozy was sunk). What was left standing was fascinating in its own right. Ex-prime minister Francois Fillon (under Sarkozy 2007-2012) is now the likely leader of the conservatives, and is described as a reformist Thatcherite. In May next year he will likely face off against Marie Le Pen, right wing populist firebrand. 

Not quite the choice offered the US public this month. 

But if labour has become blasé in office, and electoral anger rules, inviting reactionary moods among those who don't want a tired socialist or an energetic populist, what remains is a breakthrough to real change with a Thatcherite? In France? 

It asks too much of the imagination to get this right. With polls no longer the oracles they used to be, and talking heads out of favour, what is left is more genuine surprise. A revolutionary populist or a hard-charging Thatcherite? 

So either France in 2017 will lead in storming the modern European barricades reminding of the 1850s, or we are going to get a French version of the British 1980s, assuming that socialist labour has genuinely been played out. 

The betting shops are on Fillon, pipping Le Pen at the post. But we have some way to go before getting there. Either way, France will be upsetting Europe. Whether it will get transformative policy makeovers remains to be seen. 

The same drama will be playing out in Holland in March. There the populist is Geert Wilders, seeking to out-trump Trump. Except that in fragmented Holland it isn't that easy to cobble democratic  majorities together. And prime minister Rutte looks far from played out. Too many left parties are trying to broaden their popular bases, but their message losing focus, in the process losing traditional supporters. It isn't obvious that populist revolution will shortly also claim Holland. 

In soccer terms, that's potentially 3-0 at half time for the home team. Difficult to undo in a late scramble as 2017 unfolds. This may yet be too early, not yet the decisive European revolutionary year giving a Trumpian knockout & black eye. 

It won't remain without effect on the European policy mix. Its leaders deeply afraid of Putin, and put on notice by Trump that everyone will pay their own way or unceremoniously be ditched. That may require a few European countries on short notice to find 1% of GDP to bring up to scratch their defence contribution while already overborrowed and fiscally distorted. 

Populist momentum will assure a less tolerant view of refugee masses, with economic immigrants in any case send back to origin. 

And there needs to be more growth, more jobs, less Brussels. A lighter regulatory touch, more fiscal stimulus (in places) and an unclear view of what the ECB will be expected to contribute. Less or more stimulus? 

Markets waited until Trump sprung his surprise, before bonds were sunk and equities roared away. Will they again wait for the outcome before starting to rejig, or will we see a much earlier response, after Brexit & Trump being forewarned is being forearmed? 

Cees Bruggemans
Bruggemans & Associates, Consulting Economists
Website  www.bruggemans.co.za
Email. economics@bruggemans.co.za 
Twitter  @ceesbruggemans
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