Regional Specialists Review January 2011
Overview: The process of cleansing the excesses of the last decade continues around the world. By and large, this means a reversal of the leverage that was built up in many sectors of the economy. However, it also means pulling back in things we could not really afford - be it the early retirement age in France, open-handed unemployment benefits elsewhere in Europe, or generous public-sector wages and pensions across many nations.
In our view, this will serve to moderate the pace of recovery, not prevent it. Emerging nations also offer another source of support. After the currency and debt crisis of the late '90s, many of them implemented more effective governance, monetary, fiscal and wage policies which now allow them to be a source of demand and capital for the rest of the world.