2009 is ending, economically, on a significantly more optimistic note than last year: while performance in most major economies continues to be sluggish compared with the boom years leading up to the financial crisis, the paralyzing uncertainty characterizing the turbulent days at the end of 2008 has given way to a calmer climate in which definite concerns about the future are nevertheless tempered by good-news stories from emerging markets and an increased faith in the economy generally, underpinned by the vast support mechanisms put in place by the world’s leading central banks.
Nevertheless, for many economies – including some of the world’s biggest – the outlook is now clouded by the consequences of the aforementioned state support: specifically, how to repay the truly colossal sums borrowed to fund the gaps which have emerged in national budgets as a result of bailout schemes, increased welfare responsibilities and declining tax revenues; and how to reduce those budget deficits to less traumatic levels without putting the brakes on the nascent recovery.
