AT last, some light at the end of what has been a dark and miserable tunnel. The prediction last week that a surge in consumer spending and a hike in exports would spark a recovery in the economy over the next two years couldn't have been more welcome.
For us non-economists, the most reassuring thing is who actually made the comments. John FitzGerald of the ESRI is hugely respected as an economic commentator. Alan Ahearne is, of course, an advisor to Brian Lenihan, but he is the economist who best predicted the disaster looming for the Irish economy a few years back and his views carry enormous weight.
Ahearne said that lower labour costs were already "kick-starting growth". FitzGerald, while noting there were a number of caveats involved, predicted a "vigorous recovery in 2012", stating that the economy could expand by as much as 5% a year between then and 2015.
And it seems as if the growth will be export-led rather than the unsustainable, bubble-like property-led growth we had in the final years of the Celtic Tiger.
The comments are certainly not grounds for great rejoicing. For starters, it will be next year before any real impact is felt, which will mean little comfort for those who have been made unemployed and are struggling to make mortgage repayments. In fact, unemployment will probably continue to rise until the end of this year and, as FitzGerald pointed out, it will be "a challenge" to find jobs for relatively unskilled workers who have lost jobs. History tells us that unemployment is much quicker to go up than come back down.
Then there is the whole issue of the banks which still have to be sorted out. Even now, well over a year on from the famous night the bank guarantee was introduced, it's still hard to believe what a mess the banks got themselves into. And it is we, the taxpayers, who will be picking up the tab for this stupidity. While FitzGerald believes the state will eventually make a positive return on its recapitalisation of Bank of Ireland and AIB, he expects it eventually to lose large sums of money on its expected capitalisation of up to €10bn in Anglo Irish Bank. No surprise there.
Any recovery domestically is also dependent on the continued improvement in the international economy. Given our current fragile state, if the US sneezes, we will catch a lot more than a cold. But there is precious little we can do about that.
One issue that is within our control, however, is the management of the public finances. In this regard it is critical that the government continues to take the tough decisions, regardless of the political fall-out, over the coming year at least. As FitzGerald said, one more "pretty tough budget" will be required next December.
Any move by the government to water down the medicine will go down like a lead balloon on the international financial markets, which won't pause for a second before dumping Ireland into the same category as Greece. That would be disastrous and would represent a throwing away of all the progress made over the past 12 months in attempting to rebuild Ireland's damaged financial reputation.
A consistent and tough approach is also vital if the hoped for consumer recovery is going to materialise. It is true that by cutting spending, the government is taking money out of the economy with a knock-on effect on demand. But an even bigger problem at the moment is that consumers are bulking up their savings because, as FitzGerald says, they are "scared out of their wits". They will only start spending if they are confident that the worst is over and that the government is in control. Flip-flopping by the coalition, with an eye on the next general election, would seriously undermine that confidence.
The fact the government has edged up in the most recent opinion poll despite such a savage budget in December should buttress Brian Lenihan's case around the cabinet table later in the year when it comes to further cutbacks and biting the bullet on contentious issues such as a property tax.
As will the more favourable outlook from the aforementioned economists. And not withstanding the caveats, their comments do represent the first clear sign that all of the pain taken over the past 16 months may actually bear fruit. It also suggests that concerns about another lost generation may yet prove premature – let's hope so.
The more optimistic outlook may also have caused a shiver of apprehension among Fine Gael strategists. With a general election potentially still two-and-a-half years away, it is possible that by the time voters get to cast their votes, the economic picture will be looking considerably rosier. The private fear among senior Fine Gael figures is that Fianna Fáil may get some credit for that from the electorate.
The Ipsos MRBI Irish Times poll uses a form of adjustment to take account of Fianna Fáil's traditional inflated standings in opinion polls. But Fine Gael strategists will have noted that when that adjustment is excluded, Fianna Fáil is just four points behind Fine Gael and four ahead of Labour.
Everything still points to a Fine Gael-Labour government after the next election. But if the economic recovery really does take hold, the next election might end up a bit tighter than many of us had expected.