The world economy: Can it be…the recovery?

(From the economist.com) There are tantalizing signs of good news in the world economy. In America firms are hiring more and consumers are spending more. The euro zone’s recession is proving milder than expected. Greece’s debt restructuring, the first sovereign default in a developed economy for 60 years, has passed off without a hitch. Cheered by the signs of recovery, and relieved that disaster has been avoided (particularly in Europe, which towards the end of last year seemed on the brink of a calamity of Lehman-like magnitude), financial markets have been climbing steadily higher. The MSCI global share index is up by almost 9% since the beginning of the year and by 20% since its lows last October.

After so much gloom, it is hardly surprising that the world’s animal spirits are beginning to leap again. Yet there are good reasons to be wary of all the optimism. Global growth, dragged down by less ebullient emerging economies as well as recession in Europe, is still likely to be slower this year than it was in 2011.

And there are still big risks out there. Too often since the 2008 financial crisis investors’ hopes for strong and lasting growth have been dashed—whether by bad luck (soaring oil prices), bad policy (too much budget austerity too fast) or the painful realisation that recoveries after asset busts are generally weak and fragile. If tensions with Iran over its nuclear programme spike, for instance, an oil-supply shock could once more cause havoc. Much could yet go wrong.

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http://www.economist.com/node/21550278