Given the central role of government liabilities in the financial system, prolonged concerns over sovereign risk could have profound implications for the functioning of the financial system. In particular, the role of government bonds as the benchmark against which a broad array of financial assets are priced is likely to be eroded.
Shifting economic centre of gravity A second consequence of a weak recovery in advanced countries is an acceleration in the shift in the economic centre of gravity to emerging markets. This is not a new trend, but it has been turbocharged. The growth differential between advanced and emerging economies has widened sharply.