Global Growth Resilient, Except for Europe

Since the Great Financial Crisis, world financial markets have alternated between risk-on, risk-off (“RoRo”) modes. Recent data suggest that several RoRo triggers may have provided a downside cushion for the global economy—the exception being Europe. There, austerity seems to triumph over growth, perpetuating the sovereign debt/banking problems. It has also generated growing popular resistance to the current policy prescription of focusing on austerity to solve the sovereign debt crisis. This has elevated uncertainty about possible changes to the policy approach, particularly in the wake of recent election results in France and Greece.

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