LONDON The global economy faces an uneasy end to a difficult year as widespread policy uncertainty that is blunting the benefit of an ultra-loose monetary stance shows no sign of lifting.
To be sure, the re-election of U.S. President Barack Obama has answered one critical question. And consumer sentiment in America is at the highest level since the onset of the great financial crisis.
But weeks of bickering lie ahead in Washington to avert the "fiscal cliff" - an automatic package of tax rises and spending cuts in January that would almost surely plunge the American economy back into recession.
"The risk of going over the cliff is higher than markets expect and the battle for the White House will pale in comparison to the all-out war that is likely coming in Congress," economists at Nomura said in a note.
As a result, companies have no clarity as to the tax rates they will be paying in future, let alone how they might be affected by regulatory and budget changes. So why should they invest the mountain of cash they are sitting on?
Businessmen in China also have good reason to wait and see which way the wind blows, even if a flurry of October data in recent days showed the economy staging a moderate rebound.
This week's scheduled handover of power from Communist party chief Hu Jintao to Xi Jinping is unlikely to fire the starting gun for the shift from investment to consumption that even Chinese officials say is necessary to sustain strong growth.
Louis Kuijs, an economist who watches China for Royal Bank of Scotland in Hong Kong, is heartened by what he sees as joined-up thinking in the writings of Li Keqiang, the presumptive successor to Premier Wen Jiabao who will be in charge of economic policy.
But he said the new leadership was likely to bide its time, partly because China values continuity and partly out of respect for the still-influential men they are replacing.
"Hopefully we'll see a more comprehensive and ambitious reform strategy than has been the case so far. But it will be some time next year before the new leaders are able to start to put their stamp on policy-making," Kuijs said.
THE WAITING GAME
As for the euro zone, the seemingly interminable wait goes on for Greece to agree terms with its international creditors on a new dollop of aid so it can roll over foreign debts and recapitalize its enfeebled banks. Euro zone finance ministers meet on Monday to take stock.
Throw in doubts about whether Spain will seek fresh aid, elections in Italy next spring and France's appetite for reform and it is little wonder that ECB President Mario Draghi said on Thursday that he expected the euro zone economy to remain weak.
Economists polled by Reuters expect a 0.2 percent contraction in third-quarter euro zone GDP on Thursday, a repeat of the second quarter.
And the outlook is poor. Germany said on Friday it expected "a noticeably weaker economic dynamic" over the winter. For some countries, that is an understatement.
Take Portugal, which German Chancellor Angela Merkel visits on Monday to show of support for a government that is forcing through the biggest tax increases in living memory to try to meet its budget-deficit targets.
Joao Leite, an economist with Banco Carregosa in Lisbon, said he expected Portuguese output to shrink by at least two percent in 2013, twice as much as the government is forecasting.
Tax increases are "killing the economy" and, by driving more activity underground, are likely to increase - not decrease - government debt as a percentage of GDP, Leite said.
Portugal would very likely need a second international bailout followed by a debt restructuring.
"You can't ask people to work twice as hard as they used to, earn half as much and not complain. Socially, this is not going to be sustainable. That is why we will have to talk about debt restructuring in a couple of years' time," he said.
JAPAN DOWN IN THE DUMPS
In the United States, retail sales on Wednesday and industrial production on Friday are both likely to have edged up 0.2 percent in October, according to economists polled by hardly the stuff of a strong recovery.
After the Bank of England hit the pause button on monetary policy last week, the central bank's latest inflation report on Wednesday should yield clues to how it sees the balance of risks in coming months.
British job figures the same day are expected to be flat.
And in Japan, the government is expected to report on Monday that the world's No. 3 economy shrank 0.9 percent in the third quarter, or a whopping 3.4 percent at an annualized rate - another reason to ask what it will take to break the vicious circle of sagging growth and sagging confidence.
(Editing by Toby Chopra)