Trying to guess what happens next to Greece and its interminable negotiations with the EU amounts to an assessment of what runs out first: patience or money.
It's already a close run thing with reserves of both running low. If Greece didn't possess strategic importance in terms of its geographic position and, relatedly, its membership of NATO, it is quite possible that Germany for one would have given up already.
The crude references to Germany’s Nazi past and hints about a “pivot to Putin” have elicited understandable annoyance and exasperation throughout much of the European Union.
The Greeks have managed to pull off a remarkable trick. Across disparate political parties and countries there is a new consensus throughout the euro area: hardline anti-austerity left-wing views are to be treated with contempt. Our own politicians who have rushed to embrace Syriza would do well to take notice.
Game theory
There is little evidence of a sophisticated approach to negotiation, notwithstanding the supposed expertise of the Greek finance minister in game theory. As it stands, there is much speculation about the possibility that whatever happens next is likely to be both accidental and nasty.
There is a widely expressed view that Europe is now in strong enough shape for the effects of a Greek exit from the euro to be minimal – at least for everyone apart from the Greeks. It would be wise not to test this view. It is quite likely that a massive default – perhaps the biggest in history – would have unforeseeable effects. A renewed European recession would be top of my concerns.
Political instability rarely leads to positive economic outcomes. It is not just Greece that we have to worry about. The imminent UK general election is likely to lead to a hung parliament and a brand new political landscape, one that is no longer dominated by the two major parties.
This is already starting to affect financial markets. Once the political dust settles we will begin to see potentially volatile financial market action, perhaps of a prolonged kind.
It's not just – or even mainly – about the colour of the next Westminster government. It is looking increasingly likely that the days of the United Kingdom are numbered, whatever the outcome of the election. Notwithstanding the results of last year's Scottish referendum, attitudes on both sides of the border have hardened considerably over recent months.
The evisceration of the Labour Party in Scotland means that Scottish nationalists will hold considerable power, perhaps even the balance of power, in London. That looks to be utterly unsustainable.
The Union looks to be all but over, with only the structure of the new federal arrangements left to be decided. Let’s hope those negotiations are conducted with less rancour than the current discussions about Greek finances. And I haven’t mentioned the UK’s possible exit from the EU. The UK economy has been doing well but no one should be surprised if it wilts under all this political pressure.
We can only hope that all of this quickly dissipates and that our worst fears are not realised. We should not underestimate the contribution of a strong UK economy has made to our own recovery.
Irish economy
Of course, another economic tail wind for the Irish economy has been the strength of the US. There, the rise of the dollar, a bad winter, a dock strike and much reduced spending by oil producers have led to a classic “soft patch”. Something similar happened to US economic growth this time last year so it is too early to hit the panic button. But this is another reason, if one was needed, to guard against complacency about the robustness of our own growth outlook.
We have a lot going for us right now, much to celebrate. But there is a lot going on in the world that we can do absolutely nothing about. We have three main economic policy levers at our disposal. We can nurture the recovery with continuity. We can take out limited insurance against overseas events by banking – not spending – at least some of the current fiscal dividend. And the third lever is the one that kills the recovery stone dead, via Syriza-style politics and/or recidivism back into our own sorry policy history.
