Politics is local so they say, which explains why domestic events dominate our news, but the real story of recovery will first happen elsewhere. What's happening in US shopping malls has a direct bearing on the level and length of pain we are to experience and it's pretty easy to understand why. Exports account for over 80% of Irish GDP, that´s three times France's and over two and a half times Britain's dependency on demand from economies outside their own borders. Despite the surge in the importance of non-OECD economies like China, India and Brazil, the USA still remains the dominant world consumer. That's why the US remains the key to the lock.

Ireland is hugely leveraged to a global recovery, more so than any other economy in the world and similar to other very open, global traders like Singapore and Taiwan. While these are also experiencing above par economic contractions estimated at-5% this year compared to ours at -8%, neither is also dealing with a property burst created by reckless Government policies- the so-called structural deficit that Brian Cowen rejects as a spawn of Fianna Fail's political loins.

There's still very significant forces dragging against a global recovery and to underestimate them would be a folly but we are in far better shape than we were coming into this year:

The Big Threats

• Business defaults and consumer bankruptcy will create a vicious feedback loop in banking, magnifying losses.
• Rising unemployment will depress consumer demand
• Increased commodity prices, especially oil, will act like a tax on recovery from oil producing nations.
• Once the effect of the stimulus wears off, another downturn will begin.
• Government borrowing costs spike especially for the USA and interest rates rise, killing off any recovery

The Big Pluses

• US manufacturing has stopped falling.
• Credit is loosening.
• Economic growth forecasts for the USA and China are improving.
• Business and consumer confidence is rising as hope replaces despondency
• Huge excesses created by the recession should keep inflation down throughout next year

A global recovery, beginning in the second half of this year, can only be sustained into next year by an improvement in US housing and a return to spending rather than saving by US households. That hasn't changed. Governments may need to step in with new stimulus like car scrappage schemes, tax rebates and green initiatives to push consumers out shopping and avoid a second slump. Still the betting looks good for continuing strength from Asian economies where China and India are expected to grow 9% and 7% respectively next year while forecasts for the US have been upgraded by some major players like Bank of America from 1.8% to 2.6%. Europe, which is expected to contract at double the US rate this year, will be slower to recover next year due to much lower stimulus spending.

So it's early and it's fragile but it's time for hope. I prefer to see the glass half full - the strength and speed of the US economic recovery could yet defy sceptics and doomsayers and Ireland may begin to feel the fresh winds of economic recovery a lot quicker than it feels at the moment. That doesn't translate into fast growth, far from it. Next year would still feel like a recession with growth hardly above zero, but at least we'd stop contracting.

Tip: I can't really see how the ECB can seriously look at raising interest rates again until the back end of next year. That leaves about a year to repay as much lifestyle debt as you can, before the next cycle of rising rates creates runaway costs. So don't idle your cash on deposit for too long, get rid of those toxic loans left over from the big party 1994 to 2006. RIP.