I'm dealing in this post with the last three predictions from last year.
Prediction 8 was,
“Merkel wins again, but the SPD increases its relative position, as the AFL takes some votes away from other right-wing parties.”
Merkel certainly did win, and the AfL did take votes from other right-wing parties. However, Merkel didn't win enough seats to form a government, and the SPD did not increase its relative position, other than having failed to be able to form a coalition with other right-wing parties, Merkel again was led to approach the SPD to form a grand coalition. The SPD refused, but is in a relatively stronger position if it does eventually agree to a deal, because of Merkel's relatively weaker position. History would suggest that it is a mistake for the SPD to enter a coalition with Merkel.
However, if Germany's current economic boom, and the need to consolidate the EU, means that the SPD might find itself pushing against a relatively open door, in demanding policies of fiscal stimulation, and greater EU integration, as Martin Schultz has recently been promoting, could provide a justification. Even if the SPD did not find itself benefiting electorally in the short-term from such a dynamic, the strengthening of a social-democratic trend across Europe, would be larger significance, and strengthen the position of the SPD in the medium term.
As I went on to say last year,
“There is a strong incentive for Germany to consolidate its position in the EU, as the UK withdraws, by investing in productive capacity in lower cost EU countries. Expect companies like BMW, Siemens etc. to relocate production from Britain into Ireland, Spain, Portugal, Italy etc.”
Where conservative governments have created a dynamic for centrifugal forces within Europe, there is a potential now for progressive social-democratic forces to utilise the new period of economic growth to drive in the opposite direction. Germany could act as the driving force for a policy not only of greater EU integration, planning and regulation, able to develop a more specifically European capital, but also to drive the fiscal expansion across Europe, and specifically into its more undeveloped regions, that creates more unifying dynamics.
Prediction 9 I got completely wrong. It said.
“Within days of Trump's inauguration, China flexes its muscles by starting to sell its huge holdings of US sovereign and corporate bonds.”
There does seem to have been some evidence that China has not been buying as much US debt as it was, but there was certainly no flexing of its muscles by a large scale selling of of bonds etc. China possibly sees that continuing to hold that debt gives it leverage for the future, and it is keeping its powder dry. Moreover, large scale selling of debt, at a time when the US Federal Reserve is stepping back from QE, could have caused bond prices to fall sharply, and left China with large capital losses.
Prediction 10 stated,
“Trump's cosying up to Putin, and coolness to NATO, strengthens the incentive for the EU to also look to its own greater economic ties to Russia, and its own defence and strategic interests, particularly as it tries to create a more stabilised economic buffer zone around its periphery.”
The EU has not yet shown signs of developing its economic ties to Russia. It has, however, demonstrated increasing intent to look after its own security and strategic interests with the development of its Border security forces, which appear as the first signs to creating a European army.
It concluded,
“The EU will have greater success in establishing a modus vivendi with Russia, with which it has far greater economic ties, than will the US. That leads to a fit of pique on Trump's part, and a rupture between him and Putin. Putin will lose no sleep over it, as Russia's economy starts to grow on the back of increased trade and investment from the EU and China.”
Trump has not yet fallen out with Putin, but the potential for such a falling out clearly exists. These predictions can probably be described as work in progress.
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