Focus: Good Year Bad Year? (part 2)

How will it be for you? Peace hopes look dismal and the world is running out of water. But there's good news for families and the pound in your pocket. Johann Hari introduces our expert guide to help you negotiate the new year

This has been a year cast in the shadows of the twin towers – from the box office, where we gaped at nightmare visions of the United States being nuked by terrorists (The Sum of All Fears), to the ominous global politics we follow in a way we haven't done since the height of the Cold War. It seems that in 2003 the smoke from Ground Zero will still sting our eyes. Some of our commentators, it is true, are optimistic about next year – but their good cheer is directed towards domestic changes, such as the improving relationships between dads and their offspring.

This has been a year cast in the shadows of the twin towers – from the box office, where we gaped at nightmare visions of the United States being nuked by terrorists (The Sum of All Fears), to the ominous global politics we follow in a way we haven't done since the height of the Cold War. It seems that in 2003 the smoke from Ground Zero will still sting our eyes. Some of our commentators, it is true, are optimistic about next year – but their good cheer is directed towards domestic changes, such as the improving relationships between dads and their offspring.

The wider prognosis is gloomy. The global economy seems to be chuntering to a halt, and there is a danger that governments across the world, unable to do much, will fall victim to the kind of bitter, unpredictable rage battering Gerhard Schröder's administration in Germany.

Although Gordon Brown's spending targets are fixed until 2004, with large boosts for health and education, a depression might yet force him to adjust these downwards, and decisions for the years leading up to the next election are already looming. As New Labour develops the pot belly of middle age, it's hard to imagine Mr Brown and Tony Blair adjusting easily to delivering sombre announcements about public spending cuts. That, in turn, raises the possibility that they will react to falling tax revenues by delighting their MPs and core supporters with tax rises to keep spending high. Interests rates, however, are unlikely to soar, and with money staying cheap, the spectre of recession is likely to be vanquished.

What will change the political landscape is a decision on a euro referendum. If Mr Blair decides against, he will be judged a coward by his most enthusiastic supporters; a victorious Gordon Brown will be the de facto Prime Minister and there will be an audible tick-tick of anticipation for the day the removal vans arrive at No 10.

But if Mr Blair goes for the vote, politics will suddenly be unpredictable in a way we haven't seen since 1992. Mr Blair, Mr Brown, Ken Clarke and Michael Heseltine will take on Lady Thatcher, Tony Benn and Rupert Murdoch in what really will be a fight to the death.

War on Iraq is almost certain. If the 10-day victory expected in Washington doesn't materialise, it will boost those who want a mass movement against the Bush-Blair axis. And after war? Will the US rebuild Iraq, or get the hell out?

The harbingers of the big wars to come are there, too – control of water supplies may come to be as central to geo-politics as control of oil is today. All this, a new archbishop of Canterbury, Prince William's 21st, Ken Livingstone's fate in the balance as congestion charging starts, and a sequel to The Matrix. Fasten your seatbelts: 2003 is going to be a bumpy year.

The drivers' fiver that could be nemesis for Ken

Transport: The Mayor of London stakes everything on his congestion charge experiment

There will not be a uniformed jobsworth stepping out in front of your car, nor a barrier for you to activate, nor any marking on the road. Just the unheard click of a camera as you cross the invisible line into central London. Welcome to the congestion charge, the most radical attempt yet made anywhere in the world to reduce city-centre traffic.

Other cities – Paris and Rome, for example – have had one-off day-long bans; elsewhere your freedom to drive into town has been determined by the number on your registration plate – typically, odd or even-numbered days only. But the charge that will come into force in London on 17 February has never been tried on such a scale, and other cities will look and learn.

Whether the £200m scheme succeeds in reducing congestion by the 15 per cent intended – a journey that presently takes an hour should take 45 minutes – could also decide the political future of Ken Livingstone, who as Mayor of London has staked his credibility on a policy that has divided Londoners. If congestion charging fails, Livingstone might well be abandoned by the roadside. What few people would dispute is that London traffic is now so bad that something must be done. Gridlock in the capital is blighting the lives of both the vehicle-bound and people on foot.

No two pieces of research into average vehicle speed ever seem to agree. Some estimates put it at a mere 3 miles an hour – about walking pace. Transport for London (TfL), the transport arm of the Mayor's office, has a figure of just under 10mph, and falling. Journey times are reckoned to be slower now than they were 100 years ago.

Between 7.00 and 10.00 each morning, some 40,000 vehicles enter central London. The accumulation of traffic means that there is now officially no longer a "rush hour". The rush lasts all day. TfL says congestion costs the London economy £2m a week.

Exactly how drivers will have to hand over the £5 daily charge – applicable for journeys into and within central London between 7am and 6.30pm, Monday to Friday – has yet to be finalised. Almost certainly there will be a system of paying by phone and in shops. If your number plate reveals you to be a non-payer and you do not cough up by the end of the day, then you will be liable for a fine of up to £120.

The £100m-£130m that the charge is expected to raise will be ploughed back into improving London's transport. Bus services are being improved. But not everybody is happy, least of all those living on the edge of the 8 sq mile charge zone, who face the prospect of vastly increased volumes of traffic on their doorstep. "Let's wait and see what happens," says a spokesman for Transport for London. "Nobody really knows."

Simon O'Hagan

The richest teenager in the world

Money

Next month, Athina Roussel, granddaughter of Aristotle Onassis, only child of Christine and heir to the family fortune, becomes the richest teenager in the world. She turns 18 and inherits her mother's fortune, estimated at upwards of £1bn. Three years later she will double this, when she becomes custodian of the Onassis Foundation.

Athina spent her first three years being spoilt rotten by her mother, who bought her a miniature Ferrari Testarossa instead of a pram. Christina died in a bath in Buenos Aires in 1988; the coroner would not, at first, sign a death certificate because of the "questionable" circumstances which may or may not have been related to too many diet pills.

Within hours, Athina was claimed by her father, Christina's recently estranged husband, the French playboy Thierry Roussel. Roussel raised her in Switzerland with his second wife, the Swedish ex-model Gaby Landhage.

Roussel is keen to promote the idea that Athina has enjoyed a "normal" childhood; she is, he says, a "straightforward, uncomplicated, unspoiled teenager". She attended a state school, is friends with the offspring of tradesmen, received pocket money like any other child and her favourite hobby is riding. On the other hand, she is accompanied at all times by members of a team of eight SAS-trained bodyguards and travels in an armoured car.

Overshadowing Athina's childhood has been a battle for control of her and her money, between Roussel and the Greek trustees who manage the estate she will inherit. At one stage Roussel accused the Greeks of sending Israeli agents to kidnap the girl.

Athina is a source of fascination and a symbol of pride in Greece, but has spent little time in the country and can barely say "good morning" in her family tongue. She has not taken kindly to moans from the trustees that she should be more Hellenic. When she was 13, she apparently declared that she "hated everything Greek" and considered giving her inheritance away. That idea seems to have evaporated.

Elizabeth Heathcote

Crisis as waters recede from the Blue Planet

Environment

On New Year's Day, California – the world's fifth largest economy – faces having its water supplies cut. Unless a last-minute deal is struck, it will be denied access to more than 260 billion gallons a year, enough to provide for the needs of several million people.

It would be a dramatic start to the International Year of Freshwater – as the UN has designated 2003 – coming amid alarm at its growing scarcity. The state would still remain relatively well supplied, but it would have been served stark notice that even the richest societies are not immune from what is becoming one of the greatest crises of the century.

The Californian emergency stems from decades of overuse of the waters of the 1,400 mile-long Colorado river, which is now bled so dry that in some years it fails to reach the sea. The state has long taken far more than its legal allowance from the river, which flows through another six states and Mexico. What is happening now in California is likely to spread worldwide.

Already 40 per cent of the world's people live in areas where water is scarce. By 2025, this is expected to rise to 66 per cent, or 5.5 billion souls. Developing countries are hit hardest: on average people in these regions have as much water each day to satisfy all their needs for drinking, cooking, washing and cleaning as a Westerner uses in a single flush of the lavatory.

All too often the water is dirty, dangerous and diseased: 1.3 billion people lack access to safe water. Every day 6,000 children die as a result of drinking polluted water. Four out of every five bouts of illness among people in the Third World stem from the same cause.

Pollution contaminates much of the surface water in rivers and lakes. WWF has found that they are losing species faster than any other ecosystem. One-fifth of the 10,000 known freshwater species have been driven to extinction, while half the planet's wetlands have been drained.

As water becomes scarcer, competition for it will increase and, it is widely predicted, water wars will eventually break out. But there are, experts agree, two urgent priorities: the poor of the Third World must get more safe water; and the rich must use less of it.

The world's leaders have pledged to halve by 2015 the number of people without clean water and sanitation. It can be done: South Africa has provided safe water to half the 14 million of its people who lacked it when apartheid ended.

Now, even California is making do with less. It is installing water-saving appliances such as low-flush lavatories in new houses, and is planning to recycle enough water to meet the needs of 1.5 million people by 2010.

Geoffrey Lean, Environment Editor

Prince of banana skins

Royalty

When Prince Charles turned 21 he had to suffer the full ceremonial investiture as Prince of Wales. Prince William must be relieved that he is to be spared a similar ordeal. As he approaches his 21st birthday on 21 June, William is happily low-key. At university he refers to himself as "William Wales" and shows little interest in royal trappings. He could be the first of the scaled-down top royals.

Elsewhere at court, Burrell-style banana skins lie in wait: the prospect of a Charles-Camilla wedding; Edward's overblown Surrey mansion; and the misjudgments of court advisers without which no royal year now seems complete.The real questions over William and the top job are: does he want it, and will he ever get the chance?

Simon O'Hagan

Worrying? Stop it. Here's why we'll avoid recession

The economy: The housing market and cheap money should help to get Gordon Brown off the hook

It's hard not to start the new year feeling depressed about the "pound in your pocket". Share prices have fallen by a quarter in the past 12 months and, even if you aren't an active investor, you would have felt the cold chill blowing through your shrinking pension fund or the pitiful endowment policy failing to underpin your mortgage.

But will 2003 be any better? There are some pretty ominous signs.

British consumers, who have almost single-handedly kept the economy moving through this mini-recession, are appearing to tire of shopping till they drop. Maybe it's the massive level of personal debt they are carrying about with them – £6.7bn more than a year ago. Or maybe it's worries about job security, softening housing markets or the ever-tumbling stock market. Or perhaps shoppers think Gordon Brown's going to hit them with more taxes. Or that George Bush's determination to bomb Baghdad might have a nasty effect on oil prices, the stock market and a whole lot more besides.

Certainly "the drumbeat of war", as one stockbroker put it, is spooking the business and financial world. The last Gulf War, in 1991, actually jolted Western economies out of a slow slump. However, no one should trust history. Oil prices are now 50 per cent higher than a year ago, and a war could send them even higher, with knock-on effects for car drivers, transport firms and energy users.

But worse than that is the uncertainty. Markets thrive on news; they feed on events. Not knowing what will happen in Iraq, and how it will affect Wall Street and the City, has pinstriped dealmakers sitting on their well-manicured hands.

But is all this enough to send us plummeting into a depression? The British economy has been rather swimming against the tide in the rest of Europe, where Germany is in its worst mess since the 1930s. Nor is the US in much better shape. Nowhere in the developed world is more of people's wealth tied up in bricks and mortar than in Britain, and with Cassandras like Capital Economics predicting a 20 per cent fall in house prices, fear stalks the suburbs of middle England. But prices are still rising by as much as 10 per cent in most parts of the UK, and with interest rates at a historically low 4 per cent, even the most daunting mortgages appear affordable.

Which brings us to the reason why the UK will not fall into recession. Although interest rates are low, they are higher than in Europe and more than twice as high as in the US. The Bank of England may growl about house-price inflation, but the last thing it wants is a crash. If interest rates are going to go up this year, it will be by no more than half a per cent.

Money will remain cheap for now. And that is what is going to save the British economy from recession.

Jason Nissé, Business Editor