So what will the new year bring on the economic front?
This year can be summarised as having been a holding operation. The Government held the line at the budget, losing some along the way but pushing ahead in a fairly technocratic manner with a lot of legislative initiatives.
True, most of these relate to the financial calamity and were insisted on by the troika, but Taoiseach Enda Kenny has shown his true abilities as a chairman, able to inch forward with minimal fuss.
Internationally, the palpable change in attitude of the ECB on its role, if not its ultimate responsibility, has marked the tenure of Mario Draghi. No longer semi passive, it is now semi active and willing to intervene to take the worst heat out of the bond yields.
In the US, President Barack Obama held his line and his job as the Republicans continued to implode and explode at once, spinning into ever more radical sects of economic eschatology.
In Europe, the same rhetoric held. Greece sank deeper into social and economic collapse, Italy and Spain rumbled on.
Angela Merkel held her nein nein nein views on, well, anything that might cost the German taxpayer, trusting that somehow this time is different and the eurozone will continue to buy German exports despite swallowing austerity.
At home, the Anglo farce shuffles along, staffed by people on massive salaries who seem to be beyond the control and perhaps interest of the Government, and the “begotiations” on the restructuring of the odious debt of Anglo glaciated.
So what will 2013 bring? It is probable things will continue as they have done, with a slow deterioration on several levels. First, there seems no prospect that Europe will come to its senses on the required changes to the European experiment to allow the foundations to be laid for a true union. We all know what these are: A banking union, a transfer union, and a political union.
Eurozone growth for 2013 onward is forecast to be negligible, with muted inflation and rising un-employment. The ECB’s willingness to intervene in the secondary bond markets acts to keep a lid on bond yields, but this is the equivalent of aspirin. It acts to keep the temperature (bond yields) low but does little to solve the underlying problem (too much debt).
Expect to hear a lot more about Article 123 in 2013 — this is the article of the treaty on the functioning of the union which prohibits what is known as monetary financing, the underwriting of government deficits by central banks. Someone will have to pay for the writing down of excessive government debts and the logical candidate is the ECB.
Domestically and related, the Government is facing into a brutal six months.
Not content with having to manage Europe, including a crack at framing a budget in the face of growing euro hysteria from the UK Independence Party-fearing David Cameron, they will find that all the political oxygen is absorbed in a conflagration around abortion.
Meanwhile the aftershocks of the “seismic” deal agreed on bank debt in June dwindle into background noise, and for the Labour Party these become the first tremors of political oblivion, with the IMF now revealing itself as being more concerned about the poor than they are.
All indications are that we are being prepped for a deal on the Anglo promissory notes that will be minimal. In order of impact, we can reduce the interest rate, increase the repayment time or reduce the amount of these that are to be repaid. The latest statement from Mr Kenny suggests a focus on the first two.
Expect a deal that is touted as a solution but which merely kicks this can along the road for longer.
Meanwhile, the domestic economy will shuffle along with unemployment remaining stubbornly high and the prospect of a further brutal budget in 2013.
Finally, the housing market will remain mired. Although selected areas will show some growth, houses and decent apartments in established urban areas for the most part, there is a combination of overhangs that will mute any prospects for rises.
First, the transparency given by the property price register empowers bidders to bid low. Second, the property tax and uncertainty around same acts to reduce slightly the prices. Third, the likely wave of repossessions will result in increased flows of distressed property.
The reduced incomes of potential purchasers combined with a moribund banking system will make mortgage finance less accessible.
* Brian Lucey is professor of finance at Trinity College Dublin
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