Global economy: a deep and unsettling retraction that threatens to precipitate a new recession

Global weakness: Are we out of policy tools?

John H. Makin | American Enterprise Institute

Key points in this Outlook:

• With nearly two-thirds of the global economy either shrinking or slowing, the 2008 economic and financial crisis is back with a vengeance and threatens to bring on a recession that engulfs the world’s major economies.
• A convergence of factors—including an intensifying European financial crisis, a slated year-end US tax hike, and increased slowing of major developing economies—have increased uncertainty in the global economy.
• The recession may slow if Europe takes appropriate measures to stabilize its banking system and adjust its monetary policy and if the Greek election produces a cooperative government—however, these outcomes are unlikely, meaning the euro system may not survive the summer.

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