supportive of the 5 star movement or threatened the recapitalisation of the Italian banks (see Strategy Insights: Italy risks elevated). In 2017 the focus turns to core Europe, especially France and Germany. Because of the winner takes all system in France we find investors are more concerned with the situation there. Marine Le Pen and the Front National look likely to make it to the second round of voting (again according to polls) and until the vote comes in we suspect investors will be cautious about European markets. A Le Pen victory could likely bring the future of the EU and the Euro into question as she has talked about France withdrawing from both. That in turn has arguably the potential to be even more of an earthquake for the world’s financial markets. Our central case is that centre right President is elected in France (with Francois Fillon now the official Republican candidate) and Merkel is returned at the head of a coalition government in Germany. Chart 19: German polls show a consistent lead for Merkel’s CDU party __ Chart 20: Fillon well ahead of Le Pen in polls showing a potential run-off 40 100 35 a 90 4, 4,40 2,44 26 08s ©.088 an Satan S64 O86 30 {a “a ee ge . 25 " “ ‘ 60 58 Ae OM aate® A Sanne, anng*net**anatataQes 0 50 40 18 rs Zz 30 40 Ma aatttPannatattatatata*as*enans aMa 20 5 10 @CDU @SPD aAfD 0 0 12-14 15-17 13-16 10-12 14-17 9-11 25-Nov 27-Nov OO SEIS ISI I IOI INT INT IN IN I RN INE NT INT I I ANE IN CO SS April April Ma' June June Sept Hee eS PERS PPO PEERS m Francois Fillon (%) = Marine Le Pen (%) ; Source: Ifop (12-14 Apr, 14-17 Jun), BVA (15-17 Apr, 13-16 Mar, 10-12 Jun, 9-11 Sept), Odoxa (25 Source: Allensbach (15-Sept, 13-Oct), Emnid (7-Sept, 14-Sept, 21-Sept, 28-Sept, 5-Oct, 12-Oct, 19- Nov), Harris Interactive (27 Nov). Note: all 2016 Oct, 26-Oct, 2-Nov, 9-Nov, 19-Nov), Forsa (2-Sept, 9-Sept, 16-Sept, 23-Sept, 30-Sept, 7-Oct, 14-Oct, , , , , 21-Oct, 28-Oct, 4-Nov), Forschungsgruppe Wahlen (22-Sept, 13-Oct, 27-Oct, 10-Nov), GMS (14-