But, at least for the time being, the probability of this seems to have declined a little. Obviously how things play out on this front will have a major bearing on how the world economy evolves over 2012. A related issue that I suspect will be discussed frequently in 2012 and beyond is the impact of fiscal consolidation on economic growth.
Over 2012 and 2013, fiscal policy is set to be quite contractionary in both Europe and the United States as governments attempt to put their public finances on a sounder footing. Indeed, the aggregate fiscal contraction across the advanced economies is likely to be the largest seen for many decades.