Sunday 20 January 2019

Dan O'Brien: Taking stock of my 2017 New Year's Day wishlist

The year now ending was good in many ways and not so good in others - but it could have been much worse, writes Dan O'Brien

'With just a week to go before the end of the year, today is as good a day as any to assess which of them have been fulfilled.' Photo: Reuters
'With just a week to go before the end of the year, today is as good a day as any to assess which of them have been fulfilled.' Photo: Reuters
Dan O'Brien

Dan O'Brien

In this newspaper 51 weeks ago, my New Year's Day wish list included nine hopes for 2017. With just a week to go before the end of the year, today is as good a day as any to assess which of them have been fulfilled.

Ireland's economic recovery continues: Despite lots of risks and the ongoing uncertainty of Brexit, the economy performed very well for the fifth consecutive year.

The most recent numbers on the economy were the subject of last week's column so I won't rehash them here, but suffice to say almost every indicator is pointing to healthy growth across the economy as the year comes to an end.

An update worth mentioning though is how the recovery is having a broad-based effect on standards of living. Last week, the annual Survey of Income and Living Conditions was published by the CSO. Though it is somewhat dated, covering last year rather than this year, it showed that every measurement of poverty and deprivation was in decline. It also showed a small fall in income inequality.

There is every reason to believe those trends continued in 2017, given the broad economic expansion. The recovery has not alleviated all of society's ills, but it is making a big difference in many lives.

Housebuilding accelerates sharply: This wish was only partially fulfilled. Though almost every measure of house building has shown a strong pick-up, it was from a very low base, not nearly sufficient to meet the demand.

The result has been more homelessness and a rapid rise in house prices - in the first 10 months of the year, residential property prices rose by more than 10pc.

But the biggest impact has been on the hundreds of thousands of people in the private rental sector. While property prices are still 25pc below their pre-crash peak, the latest figures on rents last week showed they are 7pc above peak. And they continue to rise fast, according to the Residential Tenancies Board, which produces the figures.

Given how slowly the residential construction industry is responding to demand, and that census figures published this year showed much stronger population growth than anticipated, the problem will get worse before it gets better.

The public pay circle can be squared: Towards the end of last year, the threat of strike action by gardai saw the Government cave in and grant significant (and undeserved) pay increases to the highest-paid group in the public sector. Other groups took note and it appeared as if there would be an increase in industrial action.

That didn't materialise, in large part thanks to continued public sector pay increases, which have taken a large share of additional government spending in recent years.

The first report of the newly established Public Service Pay Commission was published in June and instead of providing new and original evidence, had all the hallmarks of being pre-cooked. The exercise amounts to wasted opportunity that could have seen fair and transparent public pay-setting mechanisms being introduced.

The European economy grows faster: A year ago, the tepid recovery of the eurozone economy continued.

Then, early in the new year, indicators across the continent suddenly began showing signs of accelerating growth.

Thankfully, they have continued in the same direction throughout the year and 2017 has been the best year for the European economy in over a decade. Even better, considerable momentum points to another good year next year, provided there are no shocks from the financial sector.

Italy doesn't go Greek: This time last year, Italy's banking crisis was intensifying. A chronically week economy was turning an ever-increasing share of the country's bank loans bad.

With a massive public debt putting the G7 nation perilously close to the brink, there were real fears the 2017 could be the year Italy became the new Greece.

Mercifully that didn't happen. New EU rules on bailing out banks were bent so bondholders and depositors in failed banks weren't burned. Much more importantly, the Italian economy picked up.

Though it remained one of the slowest growing in Europe, an increase of more than 1.5pc in GDP is strong by Italian standards over the past two decades.

It has been enough to pull the economy back from the brink.

The migration crisis calms: Wars in the Middle East, demographic pressures in Africa and a huge people trafficking industry were the major factors in a migratory surge into Europe in 2015.

Apart from the human tragedy, the influx had many implications, both for the countries that took in large numbers and for relations between those countries and other EU members that did not, and which resisted any sharing agreement across the bloc.

While the numbers applying for asylum fell back by 60,000 in 2016, in the context of 1.3 million applications for the year, the decline was small.

In the first 11 months of 2017, Eurostat data showed a much bigger decline, with asylum applications almost halving compared with the same period in 2016.

European measures to reduce flows and less violence in the Middle East have been the main factors in lowering the numbers of people seeking refuge in Europe.

Dutch, French and German elections see the centre hold: Political shocks in Britain and the US in 2016 were the culmination of anti-establishment pressures that had been building for some time. Fears that non-mainstream parties would make further electoral advances were commonplace at the beginning of the year.

Despite significant increases in the combined support for the hard right and hard left in France and Germany in this year's elections, the centre held in both countries and in elections in the Netherlands. The inclusion in government of the hard-right Freedom Party in Austria was the only real gain for the insurgents in 2017.

Brexit means soft Brexit: In January, the British prime minister confirmed she would seek a hard Brexit when she said the UK would leave the EU's customs union and single market. The saga has since provided more unpredictable twists and turns than anyone could have imagined. The past month has been particularly dramatic.

Despite all the drama, the range of possible outcomes is as wide as it was on New Year's Day, with a "no deal" Brexit remaining a very real risk and a still-live possibility that the whole enterprise will end up being reversed. Despite claims by the Irish Government that 'cast-iron guarantees" have been won on the border issue, everything remains on the table.

Trump-lite: Hopes that Donald Trump would become "presidential" upon taking office were quickly dispelled after inauguration day, but he was less disruptive for the rest of the world than he promised to be during the campaign.

Promises to label China a "currency manipulator" on his first day in office were, for example, abandoned and the inexperience of his team meant little of substance got done.

In recent weeks, Trump has appeared to be getting his act together - something of a concern on this side of the Atlantic. Last week at the UN, Ireland effectively voted against the US decision to move its embassy in Israel from Tel Aviv to Jerusalem. Trump's ambassador to the UN hinted menacingly that those countries who defied the US would face consequences.

The new tax law passed last week by congress has some provisions that look bad for Ireland and particularly bad for the giant pharmaceutical industry (Ireland is the world's biggest exporter of medicines to the US).

Provisions that reduce the tax benefits for US companies making payments to foreign subsidiaries could undermine the rationale for having operations in Ireland, and other non-US locations. The Trump-lite period of his presidency could be coming to an end.

Sunday Independent

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