Hamish McRae: On the streets of New York, I sense a recovery...

5th December 2011 - 5300 days ago

One final thought: whereas commentators in Europe vie with each other to pile on more gloom, the reverse seems to be happening in the US. When we have some decent numbers – car sales or service-industry expectations – the response is that the good news won't last. In the US, by contrast, quite a few commentators are prepared to stick their necks out. I like this comment from Ian Shepherdson, the chief US economist for High Frequency Economics: "Something good is stirring in the US economy."

In New York, at least, it feels as if he might be right.

...if only the same could be said of poor, battered Ireland

It may seem a sidebar to the agonies of the eurozone as a whole, but the further austerity being piled on Ireland is troubling – and not just for the citizens who are having to suffer the further tax increases and the yet-tighter budgetary cuts.

Ireland has up to now been the pin-up boy of the European fringe. After a wobbly start, it took its bailout money and did everything that was asked of it. Now it appears that action was not enough. An economy that had just struggled back to growth gets hit again.

Most investors have privately given up on Greece and Portugal, and expect not just a formal default but that they will leave the eurozone. But, in the case of Ireland, confidence seemed to be coming back. Bond yields had dropped from close to 14 per cent to around 8 per cent, and the country could begin to see its way back to being able to borrow on the markets again in a couple of years' time. But now they have gone back up to 10 per cent and that prospect has receded.

Something else is happening that is perhaps more ominous. Companies both in Ireland itself and with substantial operations there are starting to make plans in the event of Ireland leaving the eurozone. Of course, officially that is unthinkable. But companies have to prepare for such an outcome, however unlikely they think it might be.

There is a precedent. Those with long memories will recall how the country suddenly broke the link with sterling on 30 March 1979.