Global economic developments over the past year have been dominated by four inter-related factors: (1) the weakening global growth outlook as a result of a softening of activity in mature countries; (2) the overheating pressures in some emerging markets; (3) the sovereign debt crisis in the Euro Area; and (4) the concerns about the U.S. fiscal outlook and public debt. Discussions among Principles Consultative Group (PCG) members have focused on the evolving institutional and policy developments in coping with the Euro Area debt crisis, progress and challenges in dealing with the cases of Ireland and Iceland, and the broad agreement for a voluntary private sector involvement (PSI) in support of Greece’s reform efforts. Global economic growth weakened during the first half of 2011, primarily as a result of a softening of growth in the United States, Japan, and Euro Area. Emerging markets continued to be the main engine of growth. According to the latest Institute of International Finance (IIF) estimates, global growth is projected to decline from 4.4 percent in 2010 to 3.4 percent in 2011, with a modest pickup in 2012 to 3.6 percent. Growth in mature countries would fall back from 2.7 percent in 2010 to 1.4 percent in 2011, before recovering somewhat to 1.8 percent in 2012. Output growth in emerging economies would remain strong, but would ease steadily from 7.3 percent in 2010 to 6.0 percent in 2012. Despite the softening of growth, world inflation flared up somewhat in 2011 (to 3.9 percent, compared to 3.2 percent in 2010) as a result of strong upward pressures in oil and food prices, reflecting mainly supply shocks, as well as strong demand pressures in some key emerging markets.