We end this series of sneak peaks at our 2017 forecast by describing what the year ahead will look like for Europe. To do that, we must keep two things in mind. First, due to limited space, this must be a high-level overview of the forecast. Many of the specifics and the argument’s logic are contained in our 2017 forecast and in our daily tracking of these issues. The goal here is to paint a picture of the major forces at play. Second, we must remember that geopolitics does not observe the Gregorian calendar the same way people do. In this sense, one year is an arbitrary period of time, and our forecast for Europe is in many respects a long-term one. Readers of The Next Hundred Years, The Next Decade, and Flashpoints: The Emerging Crisis in Europe by Geopolitical Futures founder George Friedman will recognize elements of a process that has been underway for over a decade. 2017 will not be decisive, but it will be another chapter in the European Union’s slow unraveling.
The Italian Crisis
Our forecast for 2016 included a banking crisis in Italy. That crisis began to emerge in earnest by mid-year, and though developments have not accelerated as fast as we thought, the crisis has not gone away. It has played a prominent role in the destabilization of Italian domestic politics. The key problem is the Italian banking sector’s high rate of non-performing loans (NPLs). (Approximately 17% of all loans from Italian banks are non-performing, according to the European Banking Authority.) Italy also has poor prospects for meaningful economic growth in the near- to mid-term. The bank currently making headlines, Banca Monte dei Paschi di Siena, had 45 billion euros ($47.4 billion) worth of NPLs and other doubtful loans when its problems became apparent in 2016.
This post was published at Mauldin Economics on JANUARY 9, 2017.
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