Image: India © Donald Edwards, age fotostock

Ready for the next crises?

Yep. That's "crises." Plural. Because 2012 promises to be even more exciting than 2011.

First off, the euro debt crisis isn't going away. Sorry if you're bored with it. But it will take a new twist.

As Europe sinks into a self-induced recession created by all that tough talk about the need for austerity and budget cuts, we'll get treated to the spectacle of chickens coming home to roost as politicians have to explain to suffering voters why they need to tighten their belts even more to balance budgets thrown out of whack by no-growth economies.

But I do think that in 2012, we'll add exciting new crisis venues such as Russia and India.

Image: Jim Jubak

Jim Jubak

And this could be -- don't get too excited -- just a run-up to 2013, when the United States and China could get into the act.

Ready? Let me play tour guide to the next stage of the fun.

Eurozone debt, the once and future crisis

Want to know why this crisis will launch a new season in 2012? Take a look at what's going on in Ireland.

If there's a eurozone debt crisis/budget austerity success story, Ireland's it. After a $90 billion bailout, the government's annual budget deficit is projected to fall to 10.1% of gross domestic product in 2011 (from 32% in 2010 -- yes, that was the annual government budget deficit that year). That would be slightly below the 10.3% target. And the economy could actually show 1% GDP growth for 2011. Quite an improvement from the 7% drop in GDP in 2009 and the 0.4% decline last year.

That "progress" comes at considerable pain -- tax increases and budget cuts of $34 billion, so far. That's equal to about 15% of Ireland's annual GDP, or $2.2 trillion if the Irish economy were the size of the U.S. economy. Unemployment has climbed to 14.5%, and it would be higher except that, as of the end of November, 40,000 people have left the country in search of jobs. (Ireland has a population of just 4.5 million; 40,000 people is about 0.9% of the population. That level of emigration is equivalent to 2.8 million people leaving the United States.)

Combining those budget measures with the pain of falling wages, the government figures the country's austerity plan is the internal equivalent of a16% currency devaluation (roughly as if the euro went from $1.36 in U.S. dollars to $1.16). No wonder Ireland's GDP growth this year is built on a 5.4% increase in exports in the first nine months of 2011.

And the progress isn't guaranteed to continue into 2012.

The slowdown in the European economy because of the eurozone debt crisis, and the increase in interest rates because of it, have resulted in lower-than-projected tax revenue --about 1.6% below projections in the first 11 months of 2011 -- and an increase of interest payments of about $1.4 billion over the first 11 months of 2010.

The situation looks worse in 2012. On Dec. 6, Michael Noonan, Ireland's finance minister, cut his forecast for 2012 GDP growth to 1.3% for 2012, from 1.6%. That was the second cut to growth projections in a month, and Noonan's forecast is still substantially above forecasts of 1% from economists at the Economic and Social Research Institute in Dublin. This week, Noonan put forward a program of an additional $4.5 billion in cuts and tax increases designed to keep Ireland on track to hit its target of a 2012 budget deficit of 8.6% of GDP. The package included tax increases such as a 2-percentage-point increase in the sales tax, to 23%.

The plan by the European Central Bank and the International Monetary Fund has been to support Irish borrowing using bonds issued by the European Financial Stability Facility until Ireland can start raising money in the financial markets again in 2013. By 2015, the Irish debt-to-GDP ratio is supposed to be down to the eurozone limit of 3%.

That's not going to happen if growth in the eurozone economies sinks below 1% in the next quarter or two and then heads for 0%. Which is where the next European debt crisis comes in.

If you don't include the payments Ireland has to make as a result of the government bailout of banks like Anglo-Irish that collapsed along with the Irish real-estate market, then the Irish budget deficit was 1.6 billion euros lower in the first 11 months of 2011 than in the similar period in 2010. But, if you include the cost of that rescue, then the deficit was 8 billion euros higher. The debt-service costs alone ran 1.1 billion euros higher than in 2010.