As central bankers discussed scaling back their support for the economy, Irish exit strategies seemed a long way off, writes LAURA SLATTERY

THE EGGY splodge at AIB Bankcentre had no sooner finished its slow drip than the chorus of central bankers was calling it, saying the worst of this recession is behind us.

But as the trinity of European Central Bank (ECB) chairman Jean-Claude Trichet, US Federal Reserve chairman Ben Bernanke and Bank of England governor Mervyn King began discussing how they would scale back their support for the economy, closer to home such exit strategies seemed a long way off.

On Wednesday, the missile-dodging AIB board was busy declaring the number of proxy votes that said “yes, please” to a €3.5 billion capital injection from the State.

Yesterday, a clear “hurry up” could be heard from the EU, as economic and monetary affairs commissioner Joaquin Almunia urged governments to “push the process of bank restructuring forward”, or risk blocking the light for those putative “green shoots” of recovery.

But it can’t all be over already, can it?

For economists and policymakers, the answer lies, as it usually does, in the data.

It sounds like something far too dry to get excited about, but according to the Organisation for Economic Co-operation and Development (OECD), the composite leading indicators (CLIs) for China, the UK, France and Italy suggest that those economies have reached a “possible trough”, with “tentative signs of, at least, a pause” in their slowdowns.

Trichet went further, claiming that the global economy was nearing a turning point. His comments renewed hopes that the global recession could be “V-shaped”, where the line on the graph of economic activity plunges very quickly but recovers in equally swift, dramatic fashion.

The unattractive alternatives include a more prolonged “U-shaped” downturn or the kind of “L-shaped” depression endured by Japan during its lost decade, where economic activity plummets and then remains mired in the trough.

There is a fourth possibility: the “W-shaped” recession, otherwise known as the “double dip”.

If central banks get the timing for their exit strategies wrong, the global economy could falter for the second time, says Goodbody Stockbrokers economist Dermot O’Leary.

Again, the example of Japan in the early 1990s provides a cautionary tale.

“In Japan, they saw glimmers of hope and they reversed their policies, only to find it was a false dawn, and so the economy contracted again. That’s what central bankers have to be careful about.”

So are these exit strategies easier said than done?

“Easier said than done are exactly the words that I would use,” says O’Leary.

For Trichet, the exit strategy back to “a normal situation” is a “medium-term path”, while Bernanke says the Federal Reserve is working “intensively” on ways to eventually pull back the massive fiscal stimulus it has pumped into the US economy.

For Mervyn King, who has overseen the pumping of £125 billion of newly created money into the British economy, rolling back the Bank of England’s quantitative easing programme is “very simple”, he said on Wednesday.

“It is a combination of raising bank rates and selling some of the assets we have purchased . . . We’re ready to do that whenever we think it is appropriate to do so.”

By comparison, the €60 billion credit easing programme planned by the ECB for June is tiny. “Peanuts” was how economist Willem Buiter described it in Dublin this week.

But when all the policy measures are considered, the extent to which the ECB is propping up money markets is substantial.

Almost immediately after the credit crunch struck in 2007, it was forced to front-load its usual monthly money supply to the start of the money. After the collapse of Lehmans in 2008, it replaced its system of liquidity auctions with a free-for-all in which banks could avail of as much liquidity as they needed for their reserves.

Whether credit markets will ever again be able to function under rules resembling the pre-crunch system remains one of the “known unknowns”.

In any case, once they start to do their job, fiscal stimulus packages and monetary support measures will have to be withdrawn to avoid a sudden spike in inflation.

For O’Leary, the “signs of life” are more credible in the US, the first economy to enter recession, than they are in Europe, where inflationary pressures and exit routes are a long way off.

“I think Europe is still sick,” he says. And it will take the Irish even longer to join in the party than it does the euro zone, he believes.

The risk of over-optimistic forecasts was played out this week on the stock markets. In the US, consumer confidence rose in April by the most in more than two years, prompting a consensus forecast among economists that US retail sales would stabilise.

But when the data for April was published on Wednesday, it showed that US shoppers had failed to join in the brighter sentiment. Sales had actually declined again and the resulting mood swing wiped billions from global stock markets, taking 4.5 per cent off the Iseq index in its stride.

In Ireland, much now hangs on consumer confidence. Highlighting a raft of data suggesting that the Irish recession is “past the most acute point”, Davy Research economist Rossa White yesterday noted that consumer confidence in Ireland bottomed last summer, while “core” retail sales, that is retail sales excluding cars, were rising at the last count.

“But a double-dip recession is possible if the reaction of households to the recent Budget is negative,” White cautions.

Of course, pointing to the fact that the pace of decline in the Irish economy has slowed down isn’t quite the same as saying that we have stopped the rot or that a recovery has begun. We now have less far to fall.

Even Davy’s upbeat research report forecasts that the economy won’t reach the bottom until the first half of 2010. And regardless of whether lines on graphs flatten or splutter, it seems like life in the “real” economy will continue to be miserable for a while.

The Economic and Social Research Institute recently forecast that unemployment will average at 16.8 per cent next year; Davy yesterday forecast a 14.3 per cent rate. That’s still a few points higher than it is now, meaning for many Irish workers who have yet to lose their jobs, but will be forced to join the dole queues over the coming year, the worst is very definitely yet to come.

Meanwhile, as the committee rooms in Frankfurt’s Eurotower, Washington’s Constitution Street and London’s Threadneedle Street think about when and how to turn off the global economy’s life-support machine without killing the patient, in Ireland, we are still figuring out how to give the banks the crutches they need to walk again.