IT IS the season for crystal ball gazing, and very gloomy it is proving, too. Reading the papers over the holidays, I began to wonder if the Mayan prophecy that the world will end on December 21 might not catch on after all. But set against these nightmare scenarios, there are a few glimmers of hope. Over the last month, not only has its new Italian boss, Mario Draghi, backstopped Europe's troubled banks to the tune of 500 billion euros. He has also hinted that he could yet do the same for some of the continent's troubled governments, much as the Bank of England has done through its quantitative easing programme here and the Federal Reserve has done in the US. For the euro, mere survival would come as such a relief that it could well act as an economic tonic in itself. With the US showing signs of reasonable growth, it could tip the balance from renewed recession to nascent recovery. Meanwhile, in this country we have some home-grown reasons to be hopeful on the economy. If inflation falls, as most commentators think it will, that should at last allow living standards to stabilise after two years of steep decline. If the Olympics and Diamond Jubilee also go well, we could even be feeling quite cheerful by the autumn. These happy musings, of course, could easily be confounded if tensions in the Middle East send the oil price soaring once again. But there is good news on this front, too – at least in the medium term. Largely unnoticed, amidst the turmoil of the last year, the West's overwhelming dependence on imported energy is finally starting to reduce. Thanks to the exploitation of shale reserves, the US has recently become a net exporter of natural gas. After two decades of decline, US oil production is also rising again. In Europe, too, the prospects for shale gas are promising. Since gas is one of the main energy sources for electricity, if shale is a success the impact could be dramatic - particularly if electric cars take off. In 2012, it could be the turn of some of the most anti-Western regimes to feel the heat for a change. It is hard to believe Assad will see the year out in Syria, and the Kim family's grip on North Korea is not looking as assured as it was, either. Even Vladimir Putin could be in for a rough ride, following the outcry over Russia's rigged parliamentary elections.The end of the world is nigh – or possibly not, actually
Largely unnoticed, the West's dependence on imported energy is finally starting to reduce
Yet, surprisingly, for once I find myself more optimistic than the consensus. There are, I readily concede, more reasons than usual to be worried just now, even if one is not a believer in Mayan lore.
It may be a cliche to say that if the euro collapses all bets are off, but that does not make the prospect any less frightening. The Middle East, too, is looking scarier than usual. If Iran tries to block the Straits of Hormuz, through which a third of the world's seaborne oil trade passes every day, the potential consequences for global stability and the world economy will be grim.
In the wake of the disastrous Brussels summit, we have at last seen signs that the European Central Bank might be preparing, belatedly, to do more to save the euro. If so it will be hugely significant because the ECB is the one institution left with the necessary firepower to pull a rescue off. Since its continued existence depends on the single currency, it has the motive, too.
If – and it is still a big if - the ECB can finally shake off the shackles of German monetary orthodoxy and deploy its resources to full effect, then the euro (perhaps minus Greece) may yet stagger through.
Not only would this be good news for us, but it could also be bad news for some of the world's most unpleasant and corrupt regimes which rely on the high price of oil to survive. 2011 was not a good year for dictators. But our pleasure at seeing the likes of Egypt's Hosni Mubarak get their comeuppance was tempered by the uneasy realisation that, awful though they were, they were at least pro-Western.
No one can foretell the future, of course, but there is a good chance that some of these things will happen this year. If the Mayans got it wrong, and the world does not end on December 21, that will be the icing on the cake. ·
Read more: http://www.theweek.co.uk/world-news/euro-debt-crisis/43968/end-world-nigh-%E2%80%93-or-possibly-not-actually#ixzz1iQ1uXW7s
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