Traditionally, July and August are known as the silly season. There is usually little real news, and so even minor items receive disproportionately large coverage. The courts close down, politicians take their annual holidays en masse, particularly in August, and the atmosphere is quiet.

In an economics context, however, this is anything but a quiet time! We have an unprecedented juxtaposition of events, which combine to make the next couple of months among the most significant for the economy in many years. The new National Development Plan is being finalised at the same time as the two parties in Government are re-negotiating the programme for government, as discussions about the next Budget get under way, and in the run-up to the start of negotiations on a successor agreement to Partnership 2000.

To put this in perspective, let's look at the different possible outcomes of the various negotiations and discussions that are ongoing, or that are about to begin.

The Rosy Scenario: If all goes well, by the end of the year we would have a well-mapped-out infrastructural development plan. A timetable of road and rail improvements would have been drawn up, with significant in creases in the resources allocated, and significant involvement of private-sector expertise and finance. Enhanced water and sewerage facilities would be provided for in areas without such facilities at present, allowing a greater supply of housing to meet ongoing strong demand. There would be a significant increase in the provision of public housing, with more emphasis on the voluntary sector also. A new strategy would be in place for regional development, helping the greater Dublin area to cope with growth, while also bringing more of the benefits of economic growth to the other regions.

In addition, a successor to Partnership 2000 would be in place, with modest pay increases (say 3 per cent to 5 per cent per annum) in return for large tax cuts and enhanced profit-sharing arrangements. A new mechanism for public sector pay awards would also be agreed.

The Budget for 2000 would contain further significant tax cuts for PAYE workers, as well as other measures geared towards maintaining Irish competitiveness, and putting the Exchequer's finances on a stable basis over the long-term. It would address the pensions time-bomb, and "ring-fence" the pension funds being established for the State pension and for its own employees, so that no future finance minister could raid them for current spending.

A significant increase in child benefit would be implemented, so that women with children would find it easier to work if they choose to do so, and other tax changes would be aimed at increasing the quantity of childcare places available. Falling spending on unemployment benefit would be used to increase spending in other areas, such as healthcare, while maintaining a sensible cap on the total increase in current spending.

Politicians, trade union leaders and employer organisations would mutually congratulate each other on the partnership approach, and the international media might begin to move away from its sceptical stance towards the Irish economic miracle.

A Bleak Picture: But there is, of course, another scenario. . .

This time as we move forward to the end of the year, the negotiations on a successor agreement to Partnership 2000 have failed, and a wage free-for-all is underway. As it is well over a decade since the last time trade unionists and employers did not have a national wage norm, negotiations in each sector and company are difficult, and there are many industrial disputes. Meanwhile, the National Development Plan was seen by many as a damp squib. The plan had little imagination, and basically extended forwards the policies of the past. Instead of entire motorways linking Dublin, Cork, Limerick, Galway etc, the plan envisages further bypasses and ring roads, and assumes that the rapid pace of growth of traffic of recent years evaporates. The new Border, Midlands and West (BMW) region gets some extra funding, but no new strategy.

The Budget has also been disappointing. As no successor to Partnership 2000 was negotiated, the Government did not feel under pressure to reduce taxes on PAYE workers as a quid pro quo, and so the Department of Finance won the battle over the size of tax cuts, which are far more modest than in recent years. Instead, current spending rises rapidly, mostly to pay for high wage deals in the public sector, yet again. The difficulties involved in financially assisting childcare are allowed to overcome the need to do something on the issue, and so the issue is kicked to touch once more.

In another disappointment, instead of setting up a real pension fund, at arm's length from the Government, the Budget opted to simply put some of the Budget surplus into a fund which can be raided at any time to pay for current spending. That fund is simply placed in deposit-type securities instead of being invested for the long term in assets that would give much higher returns. There is considerable adverse publicity in the international business media, and those prophets of doom for the Irish economy who have been around right through the boom years are having a field day!

Critical period: The two extremes above - neither of which are likely to materialise in full - do show up just how critical the next couple of months are going to be. By the autumn, crucial decisions affecting the path of the economy for the next decade will have been made, for better or worse. No silly season this year for economists!

Eoin Fahy is senior economist at Ulster Bank Investment Managers. The views expressed here are personal.