Across central and eastern Europe, the phenomenon appears inescapable. The strongman returns. Yet whether, for the countries in question, and those who invest in them, the smack of firm government generates ‘strongman returns’ remains a potent debating point. Western sanctions and the otherwise debilitating effect of the oil price decline have appeared to give President Vladimir Putin a new lease of life as Russians rally towards a leader who appears to know what he wants in an uncertain world. Yet this is no guarantee that investors can secure worthwhile income on their investments; there may, indeed, be an inverse correlation between the domestic strength of the leadership figure and the economic return for international investors. Life may not be too pleasant, too, for the citizens within these countries. As Michael Stürmer notes, ‘Nations will rather surrender some of their cherished freedoms than part with physical security’.
Angela Merkel, the German chancellor, still afloat as Europe’s pivotal figure in a sea of growing extremism, must be particularly worried about the rising influence of France’s National Front which won 28% of the vote in the first round of the regional elections on 6 December and 27% in the second leg on 13 December, when it was beaten into third place. The party is unlikely to win the presidential poll in April-May 2017, but France – whatever its leader – does not appear to be moving towards the traditional Franco-German mantra of ‘more Europe’. Instead, those holding the reins in Paris in coming years appear likely to embody more nationalism, less room for free markets, more state control and much weaker fiscal and monetary credibility within the euro. Make no mistake: the continuing travails of the Greek economy, such a large feature of the year gone by, is a comparative sideshow. The real tests for the euro now stem not from Athens but from Paris.
In the wider world, the US looks likely to intensify international monetary polarisation by raising interest rates on 16 December for the first time for nearly a decade. We analyse what this means for the US and the rest of the world. Significantly, several noted Fed hawks – James Bullard (St. Louis), Esther George (Kansas City) and Loretta Mester (Cleveland), of whom the first two spoke at separate OMFIF meetings on 13 November – are rotating into voting membership of the rate-setting Federal Open Market Committee next year – along with one notable dove, Eric Rosengren. Darrell Delamaide analyses the delicate balance of forces in the Fed ahead of the mid-December meeting and the uncertainties prevailing in 2016, underscoring Bullard’s prediction that next year is likely to bring financial volatility.
Haihong Gao in Beijing, together with Elliot Hentov and George Hoguet from State Street Global Advisors, assess the long-term effects of the much-trailed move by the International Monetary Fund to bring the renminbi into the special drawing right. Kevin O’Nolan of Fidelity puts the decision and China’s continuing growth path into a worldwide economic context. Looking back at the past year, we assess the – on the whole rather high – accuracy of predictions for 2015 made a year ago by Bronwyn Curtis, our then chief economic adviser. In addition, 15 OMFIF-affiliated experts record their individual highlights and reflections of the past 12 months in fields ranging from India to infrastructure, from refugees to reserves. George Hoguet assesses a seminal work on the Federal Reserve by Roger Lowenstein. In total, a record 18 members of the OMFIF advisory board have contributed to this month’s Bulletin. We would like to wish them, and all other readers, a peaceful Christmas and New Year holiday period.