Sneaked out quietly on Christmas Eve was news that the UK’s economy had not grown 3.0% over the year, but rather 2.6%. This is still well ahead of any comparable European country, but it is a significant downgrade. Unfortunately, it is indicative of a global economy (and, particularly, a European economy) which is not even midway through the economic re-set required after the 2007/8 crash.
The beginning of 2014 saw a sense that the Great Recession was over. Unfortunately, 2015 will prove that it is not. In the West, particularly in Europe, we are still spending vastly more than we are earning – with Health and Welfare systems built to a much vaster extent that we can pay for, given competition for export markets from emerging markets in the Far East whose populations work longer and expect less (in the sense that they save for their own Health and Old Age). It cannot be reliably predicted when the next economic shudder will take place, but it will likely be this decade and possibly in the next twelve months. The shudder will be predicated on debt – personal, corporate and/or national – and is made even more definite by crazed and baseless rises in property prices in cities such as London and Dublin, where we should rest assured (but will ignore) that a crash some time is absolutely certain.
The Eurozone will return to the doldrums during the year, on the back of political chaos in Greece, electoral instability in Spain and administrative inaction in France, all complemented by uncertainty in Germany. Popular pressure will focus on the Euro itself, but the economic problems are more fundamental – unfortunately, the measures needed to deal with these problems are unlikely to be electorally popular. This is why Europe is in serious decline, and will remain so not just in 2015 but for at least the rest of the decade.
In Northern Ireland, unfortunately, the outlook is extremely bleak. The Executive failed completely to prepare for a financial readjustment which has been necessary since 2007 and is now urgent; and the Stormont House Agreement has not really created any new money at all, merely allowing for further delay to the fundamental financial and economic reform required. The mess being made of the public finances is even more relevant here than in most places given the number of jobs which rely upon the public purse – those do not just include direct public sector jobs and indeed it is the public-funded non-public sector jobs which will be hit first. Third (particularly Community) Sector organisations will close and others will lose funding with severe jobs cuts during the coming financial year. Direct public sector jobs will begin to be paid off too, but this pay-off will take funds away from Capital Funds which will delay infrastructure projects and destroy any prospect of a significant return to employment creation by the construction sector. Furthermore, a decline in the Eurozone will harm the Irish economy, and thus limit the buying potential of our largest export market. The only silver lining will be in the ICT, media and professional services sectors where Northern Ireland is carving out high-quality low-cost niches which will actually see average wages of those in private sector employment rise, but will not come close to compensating for public-funded employment lost. The good side to this is it may check the rise in property prices, which in fact disadvantages more people than it helps.
That is a downbeat way to end the year, but it is well to be prepared unfortunately. The unwillingness and inability to tackle the fundamental economic and financial problems we face is marked in every democracy in the world, because those proposing the correct medicine are rendered unelectable purely by so doing. Northern Ireland is just one example of this, but for complex reasons will disproportionately pay the penalty in 2015, having largely avoided it (in comparison with the rest of the British Isles) until now.
For all that, have a Happy Hogmanay.