Though the U.S. financial sector is recovering from the crisis that erupted eighteen months ago, loan losses continue to mount and banks remain dependent on government support.
International food prices remain high and the use of food commodities for biofuels production is increasing, aggravating the food security problem of the poor.
Although China could easily avoid a banking collapse in the face of rising non-performing loans, that effort would place even more pressure on low-consuming Chinese households and make economic rebalancing more difficult.
Though Italy has exhibited better fiscal management than Greece, its debt level is still higher and its competitiveness has deteriorated just as sharply. To avoid its own sovereign debt crisis, Italy must raise its primary balance, cut labor costs, and enact structural reform.
Italy has navigated the economic crisis better than many of its European neighbors, but this should not create complacency among policy makers. Unless urgent corrections are made, Italy’s economy will evolve in ways that are bound to lead to a painful crisis.
The global recovery is gaining traction as world trade and industrial production continue their impressive acceleration and the announcement of a Greek rescue package has provided the markets with much-needed reassurance.
Chinese production continues to rise faster than domestic consumption, and even if China allows the renminbi to appreciate against the dollar, a rising trade surplus could lead to another increase in tensions.
The recent flare-up in China’s diplomatic posture towards the United States was not in synch with official policy and ran counter to China’s national interests.
The plan recently announced by European leaders to support Greece leaves many questions unanswered, and markets will likely withhold judgment on the agreement until a more credible rescue package is developed.
Russia weathered the global recession better than initially feared, but the crisis has emphasized the country’s long-standing need to modernize its public sector, strengthen its financial sector, and improve its investment climate.























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