After a tumultuous year, I predict a dull 2017

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My cards are on the table and there is absolutely no doubt, none whatsoever, that I have a winning hand. Each one of my predictions will come true in 2017, barring an act of God, of course.

But let me start with my general prediction for 2017: It will be a dull-a-thon compared with 2016, by which I mean relatively calm. How do you top a year that put a reality TV star in the White House, steered Britain onto the European Union's off ramp, saw a comedian who looks like Santa Claus take the lead in the Italian election polls and sent interest rates into negative territory in some European countries? The willing purchase of bonds designed to lose you money is rather opposite of what our financial advisers taught us, yet investors gobbled them up.

This being an economics and political column, I won't delve into the other great weirdness of 2016, which was Iceland, coached by a part-time dentist, knocking England out of the Euro soccer tournament and Portugal going on to win the cup. How could any tournament in 2017 beat that?

On the economic front, monetary policy and dynamics in 2017 will finally revert to the norm after years of quantitative easing – the mass buying of sovereign bonds – by central banks in the U.S. and Europe. QE is working in Europe – inflation and growth are up – and will slowly be withdrawn. In the United States, QE is gone, the economy is trundling along nicely and the U.S. Federal Reserve is finally getting back its main policy tool, the interest rate.

On the political front, hysterical editors will continue to write breathless headlines about the rise of populism with a fascist tinge and the imminent breakup of the euro zone, the latter scenario allegedly triggered by the former. But we may reach peak populism of the Euroskeptic variety in 2017, although Italy, no stranger to the charms of demagogues, may decide that kicking the established parties in the groin would be terrific sport.

Herewith my predictions, in more granular form.

Marine life: The French presidential election's first round kicks off in April. Marine Le Pen, leader of the xenophobic, anti-EU and anti-euro National Front, will cruise into the second round, where she will sink. Tactical voting in the second round will torpedo her. True, she is the favoured candidate among those 18 to 24 years old, but that is the age group least likely to get off their smartphones and hit the voting booth. Then there is François Fillon, her presumed second-round opponent. His socially conservative views, tough position on immigration (read: Muslims), nostalgia for "the Christian roots of France" and desire to bring Russia back into the European fold all steal a lot of ground from Ms. Marine's agenda, even if his Thatcherite economic policies do not. Between the two, there is no contest – Mr. Fillon will win and the populist surge will suffer a setback.

Bring on the clowns: Beppe Grillo, the comedian leader of Italy's Five Star Movement (M5S), the anti-establishment party that wants to hold a referendum on the euro, is gunning for a snap election in 2017. No surprise why: His winning campaign for a No vote in the Dec. 4 referendum on constitutional change triggered the resignation of prime minister Matteo Renzi. While Mr. Renzi, who remains leader of the centre-left Democratic Party, wants a snap election, too, he will change his mind and delay the vote until the spring of 2018. He will do so because the euro is sinking fast and a cheap euro is great news for an exporting country, such as Italy. Any revival in the Italian economy will damage M5S's election prospects. Another blow for populism?

Cheap and cheerful euro: The combination of the European Central Bank's quantitative easing, now running at €80-billion a month, negative interest rates in Europe and rate hikes by the U.S. Federal Reserve sent the euro to $1.04 (U.S.) by Christmas. It will go under par in 2017 and keep going to 90 cents. Impossible, you say? Remember that the euro, introduced as an accounting currency in 1999, spent the first three years of its life below $1. The euro will keep sinking because the ECB still has no appetite to boost interest rates and the Fed does.

Yellen hard and loud: Federal Reserve boss Janet Yellen will hike rates no fewer than three times in 2017 – the last hike came in December – and will keep going in 2018. We don't believe the rumours that her motivation would be partly political. What better way to stall the rise of the markets, and wreck the wealth effect on the indecently wealthy, than a series of rapid-fire rate increases? Donald Trump and his rich, white supporters would hate that. Maybe that's the point ahead of the Congressional mid-term elections in 2018. But, again, that's just rumour.

Brexit boredom: The popular view is that Britain will vie with election-bound France and Italy as the main source of European political risk in 2017. Indeed, the prospect of a disorderly and damaging Brexit is not out of the question since it is now obvious that British Prime Minister Theresa May has no clue how to manage Brexit and that the EU has every motivation to protect the EU, not Britain. But that's precisely why Brexit will not emerge as the big political risk story of 2017. When the British realize they might have to hire 30,000 civil servants just to manage Brexit, and will have to pay an exit bill of €60-billion, the whole Brexit process will lose its urgency. It might even disappear. Elections and parliaments will come and go and, in 2020 or so, Britons might be saying, "Hmm, Brexit, vaguely remember it. What was it all about?"

Euro-zone euphoria: The ECB has forecast euro-zone growth of 1.7 per cent in 2017, the same as 2016. It will surprise on the upside, to use economist argot. The falling euro is a godsend to ECB president Mario Draghi's effort to juice up the economy by stimulating exports and attracting tourists. The downside is that higher-than-expected growth will remove even more of the national governments' incentive to launch economic reforms. Mr. Draghi keeps pleading for reforms but they never come. That's partly his fault – QE and a cheap euro cover up a lot of sins.

Banking on mergers: They're coming, especially in Europe. Italian banks aside, European banks ended 2016 on a high note, recovering almost all of the deep losses they made in the first half of the year. There are rumblings that Deutsche Bank wants to do a deal, but it's in rough shape, under investigation by the U.S. Department of Justice and therefore attractive to no one. My bet is that a big French bank, maybe Société Générale, will merge with one of the healthier big Italian banks, Intesa Sanpaolo or UniCredit. The creation of a pan-European bank when populist anti-EU forces are rallying would please the pro-EU crowd no end.

Long-shot predictions: The refugee crisis flares up, triggering the ouster of European Commission president Jean-Claude Juncker, who takes the fall for the EU's inability to strike a burden-sharing agreement on refugees who make it to EU soil. … Greece gets a symbolic debt reduction, all the better for German Chancellor Angela Merkel to buy peace with her eternal nemesis before Germany's autumn election campaign. … Oil prices rise a lot when it becomes apparent that there's a lack of capital spending on new crude projects and the electric-car revolution is a myth.