Johannesburg — THE year has started on an upbeat note, with local shares and even the rand taking its cue from hopes that rescue packages will halt the first global recession since the Second World War. But it is far too soon for complacency, and many South Africans still seem to think that the domestic economy can be seen in isolation from the rest of the world.

This gives rise to the flawed idea that there are steps which the government can take to avert job losses and spur growth, even as global demand for local exports wanes and investors flee emerging markets in droves.

The fact is SA is relatively well placed to ride out the shock waves generated by the global financial crisis, to which it has little direct exposure, thanks to sound regulation: economic growth slowed to a virtual halt in the third quarter of last year, but has not yet begun to contract, as is the case in the US, Europe, UK and Japan. But SA's crucial mining sector is in trouble, as prices for most of the country's mineral exports plunged last year, eroding corporate earnings. Many top miners have been forced to put expansion plans on ice and have warned they may need to retrench workers as output falls.

Enter the Congress of South African Trade Unions (Cosatu) , with proposals to amend labour laws so that companies cannot fire their staff "at the first sign" of an economic downturn. This is ludicrous. It's not as if SA doesn't already have tough labour laws, which have often been cited as one of the main impediments to faster economic growth and job creation. And SA's economy had already started to slow before the global credit crunch struck late last year, pushing several of its main trade partners into a recession, felling major international banks and leading to thousands of job cuts worldwide.

Cosatu seems to believe that local companies are chomping at the bit to axe staff at the first available opportunity, simply because it pleases them to do so. In fact, job cuts are so politically unpalatable in SA that the biggest companies will bend over backwards to avoid going that route if they possibly can. That is not a bad thing and mining giants might be able to afford it -- for a while. But smaller companies will simply fold if they can't generate the earnings to pay their employees and make a profit. That means that instead of some staff being made redundant, all of them lose their jobs.

SA is not the only country grappling to come up with measures to stimulate the economy amid conflicting views on how best to do so. Germany's coalition government clashed yesterday over whether to pursue near-term tax cuts -- backed by the conservatives -- or to cut the fees which workers pay for pensions, health and unemployment insurance, supported by the centre-left Social Democrats. In Britain, Prime Minister Gordon Brown has pledged a government- funded public works programme to create up to 100000 jobs and spur lending.

At the end of the day there is no set formula and each country must decide its own agenda. What is crucial is that decision makers set aside their ideology and do what will serve their economies best in the long term. There is no scope for either free-market capitalism or hard-core socialism in a world facing its biggest economic crisis in 80 years. It is clear that globally there must be stricter regulation -- but SA has already made the grade in this department.