A single issue casts its shadow into the year that opened yesterday the effort to build a lasting and stable peace in the North. We have had 16 months during which the guns have mostly been silent, but anything approaching political reconciliation still remains elusive. If the combined skills of the two governments, the political leaders and the paramilitary organisations can find a way out of the tangle in which they are currently stuck, 1996 will be a year to remember. All else takes second place to the historical challenge of creating a new understanding and a basis for co operation between the people of this island.

There may be an inclination to regard this as a make or break year for the Northern initiative. That will be the case only if the participants in a future round table lose sight of the ultimate purpose of talks and allow themselves to slide into permanent recrimination about modalities. The absence of widespread killing has developed a momentum of its own. This is a positive gain from the past year in which so I little else of lasting value happened. The recent series of murders in Belfast is profoundly evil, but it is also K profoundly misguided, in a political sense, if any of its perpetrators or defenders believe it will bring constructive dialogue closer. The reverse is obviously more likely. Making a durable peace after a quarter of a century of violence and several centuries of suspicion and alienation calls for psychological adjustment, and that requires time and patience.

Dublin and London need to make a New Year resolution to hold together and eliminate their differences as expediently as possible because the two governments are the linch pin on which everything else depends. But whatever expectations existed when the ceasefires took effect in 1994 of a quick resolution of political problems can now be put into the perspective of common sense.

The peace process aside, the old year ends and the new year begins with considerable optimism for the economy and an air of bustling activity in areas like popular entertainment which have become the international hallmark of the new Ireland. To watch a show like Riverdance is to realise the enormous progress in recent years in using traditional culture as a vibrant sign of distinctiveness and innovation rather than a shield against the outside world. Recent research on the Famine has helped us to understand aspects of Irish society better, such as our responsibility to the Third World, instead of deepening atavistic feelings of victimisation.

Nowhere is this new sense of self assurance more evident than in our dealings with our neighbours in the European Union which have been transformed since we joined 23 years ago yesterday. Next July Ireland takes on the responsibility of the EU presidency. It is a demanding role for a small state at this stage of the Union's evolution. For the first time it will coincide with an Inter Governmental Conference to decide on precisely which direction this ought to take, making it a more onerous and also probably a more interesting and dynamic undertaking than on the four previous occasions when Ireland held the office. All told, the Government is well prepared for the job and has managed to identify several themes which can become a leitmotif of its presidency. Among these are such matters as common action on employment and drugs, developing the EU's relations with the United States and protecting the role of smaller states in the Union's institutions. Concurrently, the need for public debate and awareness of the benefits and demands of change will become more pressing. But an outward looking democracy need have no fear of the challenge.